Economic think tank GTRI stated on Wednesday that imposing a Merchant Discount Rate (MDR) on UPI transactions exceeding ₹2,000 could drive small merchants and price-sensitive consumers back to using cash. Starting October 15, UPI merchant payments (P2M) exceeding ₹2,000 will incur an MDR of 0.4%, capped at ₹300. Additionally, specific merchant categories—such as railways, telecommunications, insurance, and fuel—will benefit from a preferential MDR of ₹5 for transactions over ₹2,000. Ajay Srivastava, founder of GTRI, posted on social media: “The MDR could prompt small merchants and price-sensitive consumers to revert to cash.”
He stated that the introduction of UPI charges is not intended to boost fiscal revenue, as the government spends only ₹20 billion to ₹25 billion annually to keep the service free.
“This amount is negligible compared to the massive subsidies the government provides for food, fertilizers, agricultural credit, and petroleum and LPG,” he added, noting that the National Payments Corporation of India (NPCI) itself recorded a profit of ₹32.7 billion and a surplus of ₹15.52 billion in the 2025 fiscal year.
He further pointed out that this is clearly not a matter of fiscal revenue, and imposing charges on UPI would not result in savings of public funds.
“The Reserve Bank of India spent 48.75 billion rupees on printing banknotes alone in the 2026 fiscal year—and that excludes the costs of transporting, storing, safeguarding, counting, and replacing cash,” he added. “Therefore, the real pressure stems not from fiscal revenue, but from Washington.”
The 2026 report by the Office of the United States Trade Representative (USTR) raised objections regarding the preferential status of UPI and RuPay, the processing of RuPay card payments via UPI, and the 30% market share cap proposed by the National Payments Corporation of India (NPCI). Srivastava noted that the zero-cost UPI and RuPay systems have diverted billions of transactions away from Visa and Mastercard—companies that typically charge network fees ranging from 1% to 3% per card transaction. He further added that Brazil has refused to undermine Pix—its public payment system similar to UPI—despite facing pressure from the U.S. and the threat of an additional 25% tariff. “India should have demonstrated similar resolve. The government can well afford to keep UPI free of charge; undermining UPI would entail greater economic and strategic costs for India. Moreover, the U.S. might soon pressure India to restrict the use of RuPay cards and withdraw the NPCI’s proposed 30% market share cap,” he said.