K.C. Venugopal, General Secretary of the All India Congress Committee (AICC), has expressed strong disapproval of the Union government’s recent introduction of transaction fees on Unified Payments Interface (UPI) transactions. He alleged that the Centre has “completely surrendered” to American interests, claiming that this move prioritises foreign demands over the welfare of Indian citizens. His comments were made during a large protest conducted by Karnataka Pradesh Congress Committee (KPCC) leaders and party workers in Bengaluru on September 16, 2023.

Venugopal stated, “Completely surrendered to the US. It is a clear-cut case of prioritising American pressures over Indian interests. The government is penalising the people of India.” These remarks underscore the Congress party’s concerns over the financial implications for the average citizen stemming from the new Merchant Discount Rate (MDR) imposed on substantial UPI transactions.

The protests reflect a growing dissatisfaction with the government’s economic policies, as KPCC representatives amplified their demands against the recently introduced charges. The sentiment during the demonstration highlighted the party’s agenda to safeguard consumer interests amidst rising costs.

Concerns Over Merchant Discount Rate Changes

Another senior Congress leader, Jairam Ramesh, also harshly criticised Prime Minister Narendra Modi’s government. He responded to the administration’s economic and diplomatic strategies regarding the United States, coining a new interpretation of NOTA to represent “Narendra’s Ongoing Trump Appeasement.” Ramesh argued that the removal of the zero-MDR policy on UPI transactions directly results from capitulation to American pressures.

Ramesh suggested that instead of countering perceived aggressive trade measures from Washington, the Indian government has acquiesced by abandoning the zero MDR framework, thereby benefiting American card networks. He questioned the decision to impose a 0.4 per cent MDR on UPI transactions, probing whether it aligns with the existing debit card MDR and serves the interest of US card companies.

In his critique, Ramesh dismissed the government’s assertion that these transaction fees are essential for maintaining the financial viability of the digital payments infrastructure. He highlighted that the operational costs associated with the UPI ecosystem represent a minor fraction of the Reserve Bank of India’s (RBI) annual surplus transfers to the government.

Impact of the New MDR Framework

The National Payments Corporation of India (NPCI) announced the new Merchant Discount Rate framework on September 12, 2023. Under this framework, UPI transactions exceeding Rs 2,000 will incur an MDR of 0.4 per cent, while consumers will still enjoy the option to transact without charges. This change is set to become effective from October 15, 2026, and will apply specifically to certain merchant transactions.

The regulations stipulate that a cap of Rs 300 per transaction will be imposed on the MDR applicable to Person-to-Merchant (P2M) UPI transactions that exceed the threshold amount. This introduction raises concerns among various stakeholders about its potential impact on the burgeoning digital payments ecosystem within India.

As the implementation date approaches, the Congress party continues to voice its opposition, advocating for reforms that would maintain a cost-effective and equitable digital payment landscape. The developments indicate a critical juncture in India’s financial technology sector, with implications for both consumers and merchants alike.

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