The Great UPI Shake-up

The new MDR framework seeks to reshape costs and incentives across India’s digital payments ecosystem. Well, enough has been deliberated upon and written on both sides of the coin about the MDR on UPI. There is no point in debating the merits of the move, because the larger economic machinery in the Raisina Hills has a definite view of why the UPI ecosystem should start generating income “just after” completing its 10 years. The timing of the move is even more audaciously peculiar, despite...

min read

The new MDR framework seeks to reshape costs and incentives across India’s digital payments ecosystem. Well, enough has been deliberated upon and written on both sides of the coin about the MDR on UPI. There is no point in debating the merits of the move, because the larger economic machinery in the Raisina Hills has a definite view of why the UPI ecosystem should start generating income “just after” completing its 10 years. The timing of the move is even more audaciously peculiar, despite the recent political resentment. Moreover, with the Supreme Court declining to grant an interim stay, the MDR-on-UPI move has, for now, continued to gather momentum, seemingly with a more resounding institutional consensus, albeit with a deferment until “immediately post Diwali”. Therefore, and more importantly, looking forward, it is rather more interesting to anticipate how market forces are going to adjust to the new realities and find an equilibrium. I strongly feel that the equilibrium will eventually be reached through a series of behavioural changes exhibited by each of the stakeholders in the UPI ecosystem. The central question is not merely whether MDR will generate revenue, but how the costs and benefits of the new arrangement will be distributed across the payment chain. A framework that creates a revenue stream for some participants may alter the incentives of others, encouraging them to change their payment practices, commercial relationships or pricing strategies. The eventual outcome will depend on how each participant responds to it. Merchant Behaviour Let us start with the least common denominator: the merchants. What are the ways in which merchant behaviour, whether among person-to-merchant (P2M) or even person-to-person merchant (P2PM) transactions, will drift and shift in an attempt to reduce or obviate MDR costs altogether? Needless to say, transaction sizes may now gravitate towards the Rs. 2,000 mark more often than not. Splitting transactions conspicuously into multiples of Rs. 2,000 could become an obvious choice, notwithstanding the legitimacy of such practices in the eyes of banks. Whether this response becomes widespread will depend on the actual applicability of the threshold, customer convenience, operational considerations and the scrutiny that such patterns may attract. But the most important behavioural shift would be merchants moving away from P2M and back into P2P. The Government, the NPCI and the leadership of all major UPI payment service provider (PSP) apps are quite emphatic about P2P UPI continuing to be free. What is stopping merchants from replacing their P2M QR codes altogether with P2P ones and getting rid of MDR altogether? If I am a smart merchant, I will maximise the daily UPI acceptance limits by displaying QR codes belonging to as many of my family members as possible at my place of business, moving away from the P2M game altogether. Differential Pricing Another obvious trend would be differential mark-up pricing by merchants for accepting UPI payments, or the additional 0.40 percent cost being incorporated into mark-up prices across the board, without much fuss. Whether merchants can pursue such strategies will depend on competitive pressures, the nature of their businesses and the extent to which customers can switch to alternatives. The next link in the chain of command is the merchant-acquiring bank and the payment aggregator (PA). PAs have long offered merchants different services apart from aggregating funds for them. There are preset service fees, convenience fees and commission-based software-as-a-service (SaaS) arrangements, all agreed upon between PAs and merchants even when there was zero MDR on UPI. Therefore, this MDR, even with a cap of Rs. 300, opens a new revenue stream for PAs, which is most likely to be independent of the aforementioned preset fees. For PAs and acquiring banks, the introduction of MDR is a question of how much of the newly created revenue pool they can retain, how much they must share with other participants, and whether the additional revenue adequately compensates for the technological and regulatory costs of acquiring and servicing merchants. The announced revenue-sharing structure allocates 40 percent of MDR to the issuer bank, 30 percent to the merchant acquirer, 20 percent to the UPI app and 10 percent to the app’s bank partner. This is significant because the entity closest to the merchant is not necessarily the entity that captures the largest share of the economics. The acquirer receives a meaningful share, but it must still make the business case work after accounting for merchant onboarding, reconciliation, settlement support, dispute management, fraud monitoring and other operating costs. For a PA, the obvious strategic response would be to increase its share of eligible merchant transactions. But that is easier said than done. MDR is payable only on eligible transactions, and the merchant’s choice of payment method, acceptance channel and acquiring relationship will determine where those transactions flow. The underlying question is whether MDR creates a sustainable margin pool or simply redistributes a previously subsidised cost across participants. The new arrangement may improve the commercial attractiveness of merchant payments, but its durability will depend on whether the additional revenue can support the infrastructure and services on which digital acceptance relies. Ultimately, the merchant’s response will be central to the outcome. If merchants find the new cost manageable and continue to favour UPI for its convenience and reconciliation benefits, the ecosystem may adjust without a fundamental disruption. If they find ways to avoid eligible transactions, renegotiate their arrangements or redirect customers towards other payment methods, the anticipated revenue pool could look very different from the one suggested by the initial allocation. The buck, therefore, does not necessarily stop with the merchant who pays the charge. It travels through an interconnected system in which every participant has both a commercial interest and the ability to influence how the transaction is routed, classified and ultimately paid for. The Battle for the Digital Rupee UPI apps have spent years competing for customers, engagement, transaction volumes and merchant acceptance. For much of that period, the ability to monetise ordinary UPI transactions was limited. The new MDR framework changes the economics for eligible merchant payments, but it does not mean that every additional transaction will produce revenue for every app. The distinction between P2P and P2M becomes commercially important here. If a merchant shifts a genuine commercial payment from a merchant-coded transaction to a personal UPI transfer, the payment app may still process the transaction, but the economics of the payment ecosystem change. The merchant may avoid the applicable merchant-side charge, while the participants entitled to a share of MDR lose the corresponding revenue. However, there is a regulatory and operational catch. A personal QR code does not transform a commercial sale into a genuine person-to-person transfer simply because the merchant chooses to display it. The classification of the transaction, the merchant’s status and the applicable NPCI framework matter. The ecosystem cannot sustainably depend on a distinction that participants have an incentive to misrepresent. This creates an interesting enforcement problem. If genuine commercial activity migrates into P2P rails, identifying that migration will require more than checking the name printed on a QR code. Transaction patterns, merchant-level receipts, account behaviour and other relevant indicators may become increasingly important, subject to applicable data protection and monitoring requirements. For PSP apps, the strategic response is therefore likely to extend beyond customer acquisition. They will need to balance merchant acceptance, transaction classification, compliance controls and the quality of their relationships with issuer banks and acquiring partners. Issuer banks deserve particular attention because they receive 40 percent of the announced MDR pool. For banks, this creates a direct economic incentive to support the sustainability of UPI infrastructure. Yet it also introduces a tension. The bank issuing the payer’s account may receive a share of MDR even though it does not necessarily own the merchant relationship or control the acquiring experience. Banks will consequently have to consider the quality and cost of their UPI infrastructure, fraud losses, customer support, transaction monitoring and the operational demands associated with increased digital payment activity. The acquiring bank, meanwhile, must compete for merchants while managing onboarding, settlement, disputes and risk. Its 30 percent share cannot be evaluated independently of these responsibilities. This is where the distinction between gross revenue and net economics becomes important. A percentage allocation may appear attractive on paper, but the real commercial outcome depends on the cost of delivering the service, the mix of eligible transactions, the merchant base and the incidence of fraud and disputes. The banks that emerge better positioned may not necessarily be those with the largest customer bases. They may be those that can combine scale with efficient operations, disciplined risk management and strong acquiring relationships. The revenue-sharing arrangement thus creates different incentives for the issuer bank and the acquiring bank. While the former receives a substantial share without necessarily controlling the merchant-facing relationship, the latter must invest in the infrastructure and services that make merchant acceptance possible. Both have a stake in the sustainability of the ecosystem, but their costs, responsibilities and commercial opportunities are not identical. The same distinction applies to payment aggregators and UPI apps. Each participant may benefit from the new revenue stream, but the final economic gain will depend on its position in the transaction chain, the services it provides and the expenses it must bear. A larger share of MDR does not automatically translate into a larger profit. The critical question is whether the additional income encourages investment in better digital payment infrastructure or merely compensates participants for costs they were previously absorbing. If it strengthens merchant services, improves reliability and supports more efficient operations, the new arrangement could help sustain the ecosystem. If the revenue is offset by higher costs or behavioural changes that reduce eligible transaction volumes, the outcome may be considerably less rewarding. The Consumer’s Dilemma Officially, MDR is a merchant-side charge, and banks have been advised to ensure that merchants do not pass it on to customers. The framework also prohibits UPI application providers from imposing platform fees or hidden charges. Nevertheless, economic incidence and legal incidence are not always identical. Legal incidence identifies the party required to pay the charge. Economic incidence describes who ultimately bears the cost after businesses adjust their prices, margins, product offerings and behaviour. A merchant may absorb the charge and accept a marginal reduction in profit. Another may attempt to renegotiate supplier terms, reduce discounts, revise prices across its product portfolio or encourage customers to use a different payment method. Explicitly adding a UPI surcharge would raise a different compliance question from a general price revision applied across payment methods. The more consequential risk is a gradual change in the commercial attractiveness of digital acceptance, particularly for merchants operating on thin margins. If the cost of accepting digital payments rises while cash remains comparatively inexpensive, some merchants may become more selective about which payments they encourage customers to make digitally. Others may absorb the expense because the benefits of digital collections, reduced cash handling and easier reconciliation outweigh the cost. The result will not be uniform across the merchant population. The consumer, therefore, may not always encounter the cost as a separate line item. It could instead appear indirectly through changes in prices, discounts or the range of payment methods that merchants prefer to accept. Whether this happens, and to what extent, will depend on the economics of individual businesses and their ability to compete. The distinction matters because the success of UPI rests not only on the financial incentives of banks, apps and payment aggregators, but also on the willingness of merchants and consumers to continue using it. A payment method that is convenient, widely accepted and economical has a strong competitive advantage. Any change that alters that balance will invite a response. The eventual equilibrium will emerge from the interaction of five forces. Some merchants may encourage smaller, separate payments. However, the economics of doing so will depend on customer convenience, operational costs, the actual applicability of the threshold and the risk of scrutiny. Some commercial activity may be presented through personal payment rails. Whether this becomes material will depend on merchant incentives, classification controls and the effectiveness of monitoring. The distinction between P2P and P2M will consequently become more important to the functioning of the framework. Merchants will evaluate whether to absorb the cost, revise general pricing, negotiate with acquirers or promote alternative payment instruments. Competitive pressure will constrain the choices available to them. Businesses with greater margins may be better placed to absorb the expense, while those operating on thin margins may be more inclined to reconsider their payment arrangements. Merchants may prefer providers capable of combining acceptance, reconciliation, fraud prevention, settlement support and software services. This could favour providers that compete on total value rather than on the MDR share alone. A payment aggregator that helps a merchant manage collections efficiently may be able to retain that relationship even when the merchant becomes more sensitive to transaction costs. The framework is expected to be reviewed periodically. Actual merchant behaviour, digital payment growth, fraud trends, the economics of acquiring and the impact on smaller businesses will be important considerations in evaluating whether the policy achieves its stated objectives. The experience of the market will ultimately be more instructive than assumptions about how participants are likely to behave. The direction of travel will become clearer only “immediately after Diwali”, as announced by NPCI, when the framework takes effect and the market produces evidence. A merchant’s decision to split a transaction or change its acceptance channel affects the revenue earned by payment intermediaries. Changes in those revenues influence the commercial attractiveness of merchant acquisition. Banks and apps, in turn, will have to determine whether the returns justify the cost of maintaining the infrastructure and services that support digital payments. Regulatory monitoring will also have to respond to actual behaviour rather than presumed outcomes. If merchants and other participants find it commercially advantageous to alter transaction patterns, the effectiveness of the framework will depend partly on whether its rules can distinguish legitimate business decisions from attempts to circumvent the intended classification of payments. The new MDR framework creates revenue for banks, merchant acquirers, UPI apps and their partners, while merchants bear the immediate cost. Consumers may also pay indirectly through higher prices or fewer discounts. Its success will depend on merchant behaviour. If merchants continue accepting UPI, the framework could support a sustainable model. If they shift to cash, cards or alternative payment methods, it could weaken the network it seeks to monetise. The market will determine the final balance. A charge introduced at one point in the transaction chain can influence decisions elsewhere, from the size and classification of a payment to the pricing of goods and the choice of acceptance channel. The question posed by MDR is larger than who pays the fee. It is about who captures the value created by UPI, who bears the cost of sustaining it, and whether the interests of the different participants can be reconciled without undermining the very system they depend on. (The writer heads the compliance and risk management functions at one of the top payment aggregators authorised by RBI. He has led risk management divisions of banks and private institutions. Views personal.)

What Cinema Misses About the Ramayana

Sreejit Datta

Aug 31

6 min read

To capture Valmiki’s wonder on screen, filmmakers must look beyond the great battle and to the poignant love between Sita and Rama.

**Yugo Sako’s 'Ramayana, The Legend of Prince Rama' came closest to ciematically capturing the tenderness of Sita and Rama’s life in Panchavati.**

Is there a key to unlock, simultaneously, the poetic beauty as well as the spiritual depth of Valmiki’s Ramayana, for the purpose of turning the epic Itihasa poem into a beautiful cine

matic adaptation? Some literary critics and Valmiki experts concur that there is indeed one such key in the Valmiki Ramayana, and it sits in plain sight right on the first few pages of the great epic poem. It concerns that poignant episode in the second chapter of the first book of the Valmiki Ramayana – the episode that describes a hunter callously slaying one of a pair of mating birds while they were lost in each other during an act of love. Few are aware of the episode, and fewer still realise that it holds the key to understanding what Valmiki’s Ramayana is really all about.

Narrow Vision

So far, every major screen adaptation of the Ramayana has pivoted on the Rama versus Ravana conflict. The horizon of imagination for these popular film/TV adaptations has seldom extended beyond portraying Lord Rama – the eponymous protagonist of the epic poem and a just but star-crossed scion of Ayodhya’s famed Ikshvaku clan – as little more than the slayer of Ravana, the hubristic king of the Rakshasa clan ruling from Lanka. Be it Ramanand Sagar’s widely popular TV series from the late 1980’s (which, by the way, was heavily inclined towards Tulsidas’s Ramacharitamanasa rather than Valmiki), or Yugo Sako’s superb animated film Ramayana: The Legend of Prince Rama (1993), or even the caricaturish recent Bollywood flick Adipurush (2023) – the screen adaptation plots have characteristically pivoted on the heroic military campaign launched by the Rama-Sugriva alliance, following the abduction of Lord Rama’s beautiful and pious wife, the Princess Sita of Videha, by Ravana.

**Valmiki and the death of the Sarus crane, Kangra school, circa 1775-1800.**

Ravana used both trickery and force to abduct Princess Sita from the forest while she was living in exile accompanying her husband Rama. Ultimately, Ravana is defeated and killed by Lord Rama in open battle. While their extraordinary military conflict provides necessary momentum to the epic’s storyline, the Rama-Ravana power dynamic does not really capture the essence of Valmiki’s Ramayana. What does capture it wholly and beautifully is the tragically disrupted romantic dynamic between Sita and Rama, apprehended early in the epic poem through the deeply significant symbolic episode of a hunter slaying one of the two lovestruck birds as the poet-sage Valmiki looks on helplessly.

Fascinating Layer

By pivoting the epic’s screen adaptation around this love story, the filmmaker will not only humanise the characters who may seem a bit distant due to their divine status but also add a fascinating layer to the narrative that permeates Valmiki’s Ramayana. In Valmiki, the development of this love story is gradual and subtle. It isn’t really what they call “love at first sight”. It doesn’t begin as soon as Rama wins Sita in marriage by stringing the great bow, Haradhanu, when both of them were merely teenagers. It is a saga of gradually deepening mutual love, which culminates in a tragic separation. Valmiki takes great care to show the young couple growing increasingly affectionate and loyal towards each other over the happy, youthful years of their cohabitation in the royal palace in Ayodhya. Yogo Sako did touch upon this aspect in his beautiful animated film, but he chose to focus on the couple’s time together in Panchavati, a sublime forest retreat where Sita and Rama had dwelt during their exile. An eminently fitting and melodious soundtrack, “Panchavati Manabhaavan Upavan”, makes for a compelling and memorable sequence of the Sita-Rama romantic dynamic in Sako’s work. Despite being part of an animated film, that sequence almost captures the expression of ideal conjugal love, in all its sweetness and hopeful aspirations, as Valmiki depicted it in his epic poem.

**Rama's Court, Folio from a Ramayana, Chamba, Himachal Pradesh 1775-1800.**

This brings us to another crucial aspect of Sita and Rama’s romantic relationship: the forest. The forest plays a major role in Valmiki’s epic poem, serving not only as the background for key events that propel and twist the epic’s plot, but also providing moving metaphors to both the union and the separation of Sita and Rama. The forest is pleasing here, terrible there; peaceful here and haunting there; it is eloquent with spring’s bounty at moments of union, and at other times impenetrably silent, mournfully still with the pathos of separation. The forest reveals its many moods in Valmiki’s poem, especially in the Aranya and Sundara Kanda-s, the third and fifth books of the Valmiki Ramayana. Therefore, any adaptation that aspires to capture the epic’s soul must be able to depict the forest in all these various moods. Needless to say, it would require some serious location hunting, because VFX simply won’t cut it. No artificial imagery, no sophistication of digital technology would be able to recreate or replace nature’s sublime majesty captured in a wide-angle lens. Without the natural touch, neither the profound joy of Sita-Rama’s togetherness nor the unbearable pain of their separation will come through in a cinematic adaptation. Thankfully, India has no dearth of breathtaking natural locations – mountain wildernesses, deep forests and virgin seashore locations still abound in this country.

Casting Choices

Lastly, a few words on casting. What sort of skill is required to play the parts of unmistakably divine, tragically vulnerable, yet enduring human characters of the Ramayana? Just like locations, India has no dearth of talented actors either. Several robust film industries in the country, catering to specific linguistic zones such as Hindi, Telugu, Malayalam, and Tamil, have been attracting a steady stream of fine acting talent over the years. But talent alone won’t suffice for the narrative and psychological demands of Ramayana characters. Filmmakers, producers, writers, casting directors, and actors need to ask themselves: Are they ready to immerse themselves in the narrative universe of Valmiki’s Ramayana? Are they willing to fathom the psychological depths, the poetic finesse, or the heroic arc of the characters they wish to recreate or play? There are documented cases from recent filmmaking history of directors and producers engaging with rigorous academic scholarship on the subjects they chose to film. Hayao Miyazaki painstakingly waded through Japanese historiography, anthropology, religious and environmental studies to prepare for the making of Princess Mononoke (1997). Peter Brook and his crew travelled across the length and breadth of the Indian Subcontinent to immerse themselves in every little aspect of traditional and contemporary Indian culture – consulting scholars and translators, visiting ancient temples, watching art forms like Kathakali and observing Hindu rituals – all as preparation for his wondrous stage and film/TV productions of the Mahabharata (1989). Are our Indian film crew ready to undertake such a mammoth preparatory discipline? Even if they were not to engage with the scholarly output on Valmiki Ramayana to prepare for a film/TV adaptation, are they at least willing to read the text from cover to cover, at least in the form of a serious and unabridged modern translation of the kind that, for example, the late Bibek Debroy has produced in three volumes? One hopes that such dedication, commitment, and artistic daring are still not lacking in a handful of Indian actors, even in today’s zooming-zapping-wheezing digital world of ever-shortening attention span and amid the ever-widening scope of artificiality.

**18th-century Pahari miniature painting from the 'Shangri' Ramayana series depicting Rama, Sita and Lakshmana at their forest hermitage in Panchavati.**

Aadi-Kavi Valmiki’s Ramayana is a tale of silent yet intense love – one in which the royal lovers themselves make unthinkable sacrifices for the greater good while enduring unbearable pain through loneliness and eternal ignominy. If nothing else, the filmmakers and actors seeking to adapt this Aadi Mahakavya for the screen need to bring to the project a fraction of that sacrifice and loving dedication in their art and trade. The fruit of their labours should reflect love for the saga of Sita-Rama, above all. That, apart from producing a stellar adaptation, would also become a most fitting tribute to this enduring classic of the Indian civilisation.

(The writer is a Kolkata-based educator, writer, researcher and musician. Views personal.)

The Great UPI Shake-up

What Cinema Misses About the Ramayana

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