Opposition Mounts Protests Over New Merchant Fees
The Biju Janata Dal has rejected the central government’s policy introducing new transaction fees on digital payments. The controversy centers on a 0.4 percent Merchant Discount Rate for person-to-merchant UPI transactions exceeding Rs 2,000. Scheduled to take effect on October 15, the decision has sparked debate over digital ecosystem funding.
NPCI Policy Announcement ──> 0.4% MDR on Merchant Payments Over Rs 2,000
└──> Political Backlash Over Consumer & Trader Impact
Speaking at the Constitution Club in New Delhi, BJD Rajya Sabha Member of Parliament Santrupt Misra questioned the government’s approach. He urged the administration to explore alternative funding sources for payment systems instead of imposing merchant fees. Misra warned that additional charges will squeeze merchant profit margins or reach consumers indirectly.
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Structure of the October 15 UPI Merchant Discount Rate
| Payment Category | Transaction Value | Applicable Merchant Fee | Fee Obligation Entity |
| Person-to-Person (P2P) | Any transaction amount | Zero (100% Free) | Neither sender nor receiver |
| Small Merchants (P2PM) | Up to Rs 1 Lakh monthly earnings | Zero (100% Free) | Small business owner |
| Standard Retail Outlets | Up to Rs 2,000 | Zero (100% Free) | Merchant |
| Standard Retail Outlets | Above Rs 2,000 | 0.4% (Capped at Rs 300) | Merchant (Cannot pass to user) |
| Utilities, Fuel, Railways | Above Rs 2,000 | Flat Rs 5 per transaction | Service provider or outlet |
BJD Proposes Alternative Funding Mechanisms
Addressing reporters, Misra highlighted state resources that could support digital transaction infrastructure. He noted that the Reserve Bank of India transferred a record dividend of Rs 2.86 lakh crore to the central government for fiscal year 2025-26. Setting aside a minor portion of this dividend could cover annual server upkeep and cybersecurity expenses.
Proposed Financing Model ──> Allocate Part of RBI’s Rs 2.86 Lakh Cr Dividend
└──> Fund NPCI Network Maintenance Directly
The Odisha lawmaker also referenced the financial performance of promoter institutions behind the National Payments Corporation of India. Major commercial banks and digital platforms supporting NPCI recorded combined profits exceeding Rs 2.5 lakh crore last year. Misra argued these profitable shareholders could easily absorb system maintenance costs rather than penalizing retail traders.
| Financial Source | Reported Figure / Annual Yield | BJD Proposed Utilization |
| RBI Dividend Transfer | Rs 2.86 Lakh Crore (FY 2025-26) | Fund central digital infrastructure directly |
| NPCI Shareholder Bank Profits | Exceeds Rs 2.5 Lakh Crore | Absorb operational costs through platform revenue |
| UPI System Maintenance Cost | ~Rs 20,000 Crore annually | Covered entirely without merchant levies |
Misra Rejects Claims of Zero Consumer Impact
The central government maintains that the new fee framework will not affect ordinary citizens, as merchants pay the processing charge. However, Misra dismissed this position as a misunderstanding of basic economic principles. When businesses face higher operational costs, those expenses eventually influence retail pricing strategies across competitive markets.
Small merchants operating on thin profit margins face difficult operational decisions. While payments under Rs 2,000 remain free, mid-sized retailers handling larger order sizes will absorb continuous fees. Industry analysts agree that persistent merchant levies risk slowing digital payment adoption among regional businesses.
Merchant Squeeze ──> Thin Profit Margins Reduced by 0.4% MDR
└──> Potential Price Adjustments on Retail Goods
| Business Parameter | Status Under New Framework | Economic Consequence |
| Small Traders (P2PM) | Zero MDR on receipts under Rs 1 Lakh/month | Protected from immediate transaction costs |
| Mid-Sized Retailers | 0.4% MDR on transactions > Rs 2,000 | Profit margins compressed on larger ticket sales |
| Consumer Pricing | Direct fees prohibited by banks | Risk of indirect price increases on shelf items |
Government Outlook on Ecosystem Sustainability
Official sources defend the October 15 policy by emphasizing system reliability and security needs. Operating real-time payment rails across billions of transactions requires massive capital investments in server bandwidth and fraud prevention. NPCI data reveals that UPI handled 2,451 crore transactions worth Rs 29.9 lakh crore in August 2026 alone.
The Ministry of Finance stresses that over 95 percent of daily merchant transactions fall below the Rs 2,000 threshold, keeping daily consumer shopping free of processing charges. Despite these assurances, opposition political parties and trader federations continue demanding a total roll-back. As the October deadline nears, political debate surrounding payment infrastructure funding is likely to intensify across the country.