A sharp policy debate has broken out across India's digital finance ecosystem following the decision to introduce a merchant discount rate on UPI transactions exceeding Rs 2,000. Industry leaders have taken opposing stances regarding the commercial direction of the payment infrastructure. BharatPe co-founder Ashneer Grover strongly criticized the move, prompting PhonePe CEO Sameer Nigam to mount a direct defense of the proposed fee framework. Nigam dismissed the pushback, stating that he does not take Grover's commentary seriously.
Differing Perspectives on Payment Economics
Sameer Nigam backed the proposed merchant discount rate on select UPI payments, arguing that the updated setup remains substantially cheaper than traditional card payment networks. He highlighted that the framework incorporates clearly defined fee caps across multiple commercial categories. Earlier, Ashneer Grover had questioned the necessity of introducing transaction charges on the network. Grover contended that an operational infrastructure functioning effectively at such an immense scale should not be subjected to structural fee alterations.
Concerns Around Merchant Behavior and User Growth
In his critique, Grover warned that levying costs on UPI transfers could discourage both merchants and end users from utilizing the platform. He described imposing fees on payments above Rs 2,000 as a misstep that could hinder the nationwide momentum toward digital payment adoption. Responding to these concerns, Nigam clarified that merchants are legally restricted from passing the UPI MDR burden directly onto everyday consumers. He pointed to category-specific thresholds, noting that essential segments such as insurance, fuel, and utility bill payments carry a capped fee of Rs 5. Furthermore, transactions within the capital market sector are subject to an MDR of 0.02 percent, governed by an upper limit of Rs 300.
Moving Beyond Subsidies Toward Commercial Viability
Addressing the broader financial health of the sector, Nigam emphasized that the payments industry cannot perpetually depend on government subsidies to sustain operations. As transaction volumes expand exponentially, establishing a durable commercial model for UPI has become an operational necessity. Rebuffing the criticism, Nigam reaffirmed that he does not view Grover's opinions as credible industry guidance. Meanwhile, BharatPe clarified that Grover has had no association with the firm since 2024, explicitly distancing the enterprise from his personal perspectives.
Rollout Timeline and Category Caps Starting October 15
The policy decision to implement MDR on UPI payments aims to support the long-term maintenance and expansion of digital payment infrastructure. Under the schedule taking effect from October 15, UPI transfers above Rs 2,000 will attract a 0.04 percent charge, primarily impacting higher-value transactions. To prevent excessive burdens on routine commerce, charges on fuel purchases like petrol and diesel have been standardized. Regardless of the total amount spent on fuel via UPI, the associated merchant discount rate remains firmly fixed at a flat Rs 5 per transaction.
