The Biju Janata Dal (BJD) has opposed the Centre’s decision to impose a 0.4 per cent merchant discount rate (MDR) on person-to-merchant UPI transactions above ₹2,000, arguing that the government should explore alternative ways to fund the country’s digital payments infrastructure.
The new charge is scheduled to come into effect from October 15. BJD Rajya Sabha MP Santrupt Misra said the move could affect merchants by reducing their profit margins and could eventually result in higher costs for consumers.
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Speaking at a press conference at the Constitution Club in New Delhi, Misra said the government could have considered directly supporting the cost of maintaining the UPI network instead of introducing a charge on certain merchant transactions.
“In 2025-2026, the RBI gave a dividend of ₹2.86 lakh crore to the government. A small part of this could have been kept aside for the digital-transaction infrastructure,” the Odisha MP said.
Misra also pointed to the financial position of banks and digital payment platforms that are shareholders and promoters of the National Payments Corporation of India (NPCI), the organisation that operates the UPI system.
According to Misra, these banks recorded a combined profit of around ₹2.5 lakh crore last year. He argued that even a small contribution from these institutions could have helped support the infrastructure required to operate the digital payments network.
The BJD leader also rejected the government’s position that the new MDR would not affect consumers.
“The government says the MDR will not impact consumers. But this is a complete misunderstanding of economics,” Misra said.
Under the new arrangement, the 0.4 per cent MDR will apply to UPI payments above ₹2,000 made to merchants from October 15. The change has raised questions about who will ultimately bear the additional cost associated with such transactions.
Merchant discount rates are charges linked to digital payment transactions and are generally paid within the payment ecosystem. The impact of the new structure will depend on how banks, payment platforms and merchants absorb the cost.
The BJD’s objection centres on the view that maintaining UPI, which has become a major part of India’s digital payments ecosystem, should be supported through other funding mechanisms rather than placing an additional charge on qualifying merchant transactions.
Misra suggested that the Centre could have used a portion of its receipts, including the dividend received from the Reserve Bank of India, for this purpose. He also argued that financially stronger banks associated with the NPCI ecosystem could contribute towards maintaining the infrastructure.
The issue comes as UPI continues to play a major role in India’s digital payments landscape, with consumers and businesses increasingly relying on instant bank-to-bank transactions.
The Centre’s decision will take effect on October 15, while the BJD has called for a reconsideration of the proposed MDR and urged the government to examine alternative mechanisms for financing the country’s digital payment infrastructure.
