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23 August 2024 at 9:59:04 pm

Hidden Economics

The reassuring part of the new Unified Payments Interface (UPI) framework is that customers will apparently not be charged for using UPI. The more interesting part is who, then, pays for keeping one of the world’s most widely used digital-payment systems running. From October 15, a Merchant Discount Rate (MDR) of 0.4 percent will apply to specified person-to-merchant transactions above Rs. 2,000, with a ceiling of Rs. 300 on transactions of Rs. 75,000 or more. Person-to-person payments remain...

Hidden Economics

The reassuring part of the new Unified Payments Interface (UPI) framework is that customers will apparently not be charged for using UPI. The more interesting part is who, then, pays for keeping one of the world’s most widely used digital-payment systems running. From October 15, a Merchant Discount Rate (MDR) of 0.4 percent will apply to specified person-to-merchant transactions above Rs. 2,000, with a ceiling of Rs. 300 on transactions of Rs. 75,000 or more. Person-to-person payments remain free irrespective of the amount, while merchant payments up to Rs. 2,000 remain free. Small merchants receiving up to Rs. 1 lakh a month through UPI QR codes will also continue to enjoy zero MDR. The government says roughly 96 percent of merchant transactions will remain unaffected. So, technically, the customer is exempt. MDR is not a tax collected by the government or NPCI. It is a charge within the payments ecosystem, to be shared among banks, payment-service providers and UPI application providers. But that does not make the economics irrelevant to customers. A merchant who previously accepted a large UPI payment at no direct payment cost will now have to absorb a fee. The government has advised banks to ensure that merchants do not pass the MDR on to customers. The economic reality is less tidy. Businesses ultimately recover costs through their overall pricing. Whether the new charge appears as a visible surcharge, a change in discounts or simply becomes part of the cost of doing business will depend on the merchant and the market. That is why the real beneficiaries of the new framework are not necessarily the customers alone. Payment companies, banks and other participants in the UPI ecosystem acquire a new revenue stream from transactions that were previously free. Paytm, for instance, has said the new MDR will generate additional revenue from merchant transactions that earlier carried no such charge. The money is therefore being redistributed within the payments ecosystem. Small businesses are deliberately insulated, an important distinction in an economy where street vendors and neighbourhood shops have adopted QR payments because they are cheap and frictionless. There is also a larger question. UPI became ubiquitous partly because its basic proposition was brutally simple: instant payments without a visible charge. Introducing MDR for a slice of transactions changes that economic model. The government’s argument is that UPI needs a sustainable financial architecture as its scale grows. But sustainability should not be confused with costlessness. Someone has to finance the infrastructure, security and technology behind a system processing billions of transactions. For now, the customer remains protected. The real test will be whether merchants absorb the cost without quietly transferring it through prices and whether the revenue flowing to banks and fintech companies translates into a stronger, more resilient UPI ecosystem rather than simply a new source of income for its intermediaries.

Knives out in legislature

Writer: Abhijit Mulye
Abhijit Mulye
Mar 20, 2025
3 min read

Updated: Mar 21, 2025

Disha Salian

Mumbai: Death of celebrity manager Disha Salian in 2020 once again rocked the Maharashtra legislature on Thursday. While cabinet ministers Nitesh Rane and Shambhuraj Desai demanded that Shiv Sena (UBT) leader Aditya Thackeray be arrested in the case, BJP MLA Amit Satam in the assembly and another BJP member Chitra Wagh in the council demanded that the report of SIT to probe Salian’s death be made public.


Incidentally, amidst repeated disruptions in both the houses, some members from the treasury benches were seen speaking in favour of Aditya Thackeray, while Shiv Sena (UBT) members like Adv Anil Parab were seen supporting the BJP members’ demand that the report of the SIT probe be made public. In addition, there were allegations and counter allegations and personal accusations among members from the treasury and opposition benches which led to heated debate on occasions.


The opposition termed the attempts from the treasury benches to link Shiv Sena (UBT) leader Aditya Thackeray’s name in the case, as a ‘conspiracy’.


“I think this matter has gone to the court. We have no idea what he (Disha’s father) has said, but Aaditya Thackeray is a mature leader, a young leader. The Bharatiya Janata Party is conspiring to defame him by putting pressure on him. We don’t need to answer to this conspiracy. The court will answer,” Ambadas Danve said.


Earlier in the day, when the house gathered for the business, Minister of State for Home appraised the assembly of the status in this case. “SIT has been formed to probe in the case. Their report has not been received as yet. However, the government shall act according to directives from the court,” the minister told the house.


Another BJP minister Nitesh Rane, however, said that since Satish Salian has levelled allegations against an MVA minister, that leader be treated like a common person and that everybody should be treated equally before the law. Shiv Sena minister Shambhuraj Desai too supported the demand. “Since the allegations are grave, the person in question should be immediately arrested and the case be investigated,” he said.


Later, while speaking to media in the legislature premises, Rane asked Uddhav Thackeray to come clean on the issue. “If they say that we are politicizing the issue, Uddhav Thackeray should also tell the people why he had called, not just once but twice, to the then union minister Narayan Rane urging him to save his son?” Rane said.


He also accused the opposition of shying away from coming clean on the issue. “If they feel that we are not telling the truth, they should say so in the house. But they are shying away from doing so. Bhaskar Jadhav, who is always aggressive, was nowhere to be seen when this issue came up in the house. Sunil Prabhu too escaped the house under the pretext of a phone call. I challenge them to say that whatever I said on the issue is wrong,” Rane said.


He also said that Aditya Thackeray should resign on moral grounds till his name is cleared in the case.


BJP MLA Amit Satam demanded that the details of the SIT probe be made public so that the people would know if the probe is headed in right direction.


Interestingly, while the ruling parties were targeting the opposition in the case, senior BJP leader Sudhir Mungantiwar surprised all with his unexpected support to Thackerays. “I do not have any evidences in the case. But if her father has made any fresh allegations that needs to be investigated thoroughly. The assembly can discuss the issue at length tomorrow. In the meanwhile, members like Rane, who seem to have some evidences in the case should hand them over to the investigating agencies and help the probe,” he told the house.


Shiv Sena’s Sanjay Gaikwad and Sheetal Mhatre too toed the line and demanded that more and more evidences should come forth.


Similarly, when members of treasury benches were pushing for revealing the details of the probe till date to the public, Shiv Sena (UBT) member Anil Parab supported the demand. “Doing that shall conclusively prove the innocence of Aditya Thackeray,” he said.

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