Paytm founder and CEO Vijay Shekhar Sharma has backed the introduction of charges on higher-value UPI merchant transactions, describing the move as a “Robin Hood” approach that protects small users and merchants while creating a sustainable financial model for the digital payments ecosystem.
The National Payments Corporation of India (NPCI) has introduced a 0.4% merchant discount rate (MDR) on person-to-merchant UPI transactions above ₹2,000 from October 15.
While speaking to DD News, Sharma said UPI had operated largely through a grant-supported model until now, with government support helping maintain the platform’s infrastructure.
Larger payments to support UPI sustainability
Speaking to DD News, Sharma said introducing charges for bigger transactions would shift the model towards greater financial sustainability while ensuring small merchants continue to access free digital payments.
"It's a long-pending issue that everyone knew would eventually see some charge come in," Sharma said, adding that he welcomed the government’s decision to protect small shopkeepers.
He pointed out that other payment methods used in stores and online platforms already involve transaction charges, while UPI had remained free. According to Sharma, applying MDR selectively on larger payments would help build a long-term revenue structure for UPI.
Govt clarifies no impact on small transactions
The Finance Ministry clarified that the revised UPI framework would not affect person-to-person transactions, which will continue to remain free regardless of transaction value.
"UPI will continue to remain completely free for all person-to-person transactions, irrespective of the amount transferred. Payments to merchants up to Rs 2,000, along with transactions covered under the zero-MDR framework for small merchants, will also remain free. Consequently, approximately 96% of all P2M transactions will remain unaffected. MDR will apply only to specified merchant transactions above Rs 2,000."
The ministry also clarified that MDR is neither a tax nor a fee collected by the government or NPCI.
The Reserve Bank of India said the introduction of MDR on large-value UPI transactions would strengthen the digital payments ecosystem.
"It will help UPI in continuing to scale, innovate and serve consumers and businesses across the country," the RBI said in a post on X.
