Sanjay Malhotra – Bharat Pulse News

The Unified Payments Interface is not merely another government programme that looks impressive in a presentation but remains distant from the everyday lives of ordinary Indians. UPI has genuinely transformed how India functions. It has changed how a family pays its electricity bill, how a commuter pays an autorickshaw driver, how a patient buys medicines, how a roadside vendor accepts ten rupees and how a small business receives thousands without installing an expensive card machine. From metropolitan shopping centres to village markets, a simple QR code has replaced the search for change, trips to the ATM and the familiar uncertainty of whether a merchant will accept a card. It has made instant bank-to-bank payments so ordinary that millions of Indians now take the technology for granted. That, perhaps, is the strongest proof of its success. UPI is also one of the clearest and most visible triumphs of Narendra Modi’s Digital India project. Governments routinely make grand announcements about transformation, inclusion and technological progress. UPI delivered all three directly into the hands of the citizen. It gave India a payment infrastructure that many richer countries still struggle to replicate with the same simplicity, interoperability and reach. In July 2026 alone, UPI reportedly processed transactions worth almost ₹30 lakh crore. The scale is extraordinary, but the greater achievement lies in how naturally the system has entered daily life. UPI is no longer an optional payment product. It has become part of India’s economic bloodstream. That is why the emerging discussion about restoring merchant charges on selected UPI transactions is so worrying. The government has moved towards creating a legal framework that could permit the return of the Merchant Discount Rate, or MDR, on certain digital payments. Reports suggest that one model under consideration could impose a charge of approximately 0.3% to 0.5% on UPI payments above ₹2,000 made to larger merchants. No final decision has yet been announced, and RBI Governor Sanjay Malhotra has described the discussion as premature. Nevertheless, the policy direction is unmistakable: officials are preparing the ground for somebody to be charged. The Governor’s justification is straightforward: payment infrastructure costs money, and “someone has to pay.” He is right about the first part. Servers cost money. Cybersecurity costs money. Fraud detection, customer support, bank integration, dispute resolution, software maintenance and payment switching all cost money. But the phrase “someone has to pay” is not the conclusion of the debate. It is merely its beginning. The real question is: who benefits from UPI, who saves money because of UPI, and who should therefore contribute towards sustaining it? That is where conventional bureaucratic thinking threatens to undermine one of India’s greatest technological achievements. UPI Is Not Just Another Commercial Payment Product Government officials must stop assessing UPI as though it were merely an Indian version of a private card network. UPI is digital public infrastructure. It performs a national function far beyond transferring money between two bank accounts. It encourages financial inclusion, reduces dependence on cash, improves transaction transparency, lowers friction in commerce, strengthens economic formalisation and gives India greater control over its own payment architecture. A conventional payment company may ask whether each transaction generates sufficient revenue. A government must ask a much larger question: what economic value does the entire system create for the country? That distinction is critical. A road does not become worthless merely because every motorist is not charged at every kilometre. A public digital identity system is not judged only by the revenue it earns from each authentication. Railway infrastructure, electricity networks, public banking systems and telecommunications projects are evaluated partly through the economic activity they enable. UPI must be judged through the same lens. It is a national efficiency platform, not merely a payment service awaiting monetisation. Dear Prime Minister, Protect Your Own Legacy Narendra Modi should recognise the political and historical significance of what his government has created. UPI is among the rare government achievements that cuts across class, geography, language and political affiliation. A person may disagree with the government on dozens of subjects and still use UPI several times a day. That universality gives it enormous credibility. It also represents something larger about India. For decades, India was portrayed as a country that imported technology, followed foreign standards and adapted systems created elsewhere. UPI reversed that narrative. India built a payment architecture suited to its own scale and needs and then began presenting it to the world as a model of digital public infrastructure. That success must not now be handed over to officials who can calculate the cost of processing a transaction but cannot appreciate the national value created by making that transaction effortless. Mr Prime Minister, this is your government’s triumph. Do not permit government babus, banking lobbyists and spreadsheet economists to slowly convert it into another fee-generating system. Yes, Someone Must Pay—The Government Should Pay Its Share The Governor’s argument that UPI cannot operate without funding is reasonable. What is unreasonable is the assumption that the solution must begin with charging merchants at the point of transaction. The government is one of UPI’s largest beneficiaries. Every payment shifted from cash to a traceable banking channel contributes, directly or indirectly, to formalisation. Digital transactions create records. Records improve accountability. Greater accountability strengthens tax compliance, reduces the space for undeclared commercial activity and makes economic flows easier to measure. The government also benefits when fewer people depend entirely upon cash. Cash requires printing, transportation, security, storage, counting, verification, replacement and destruction. Currency must be moved between printing presses, RBI facilities, bank branches, ATMs, businesses and consumers. Every stage involves infrastructure and manpower. UPI reduces some of that burden. Therefore, government support for UPI should not be described as a handout to banks or fintech companies. It should be recognised as reinvestment in infrastructure that saves the state money and improves the functioning of the economy. Yes, someone must pay. The government should be among those paying because the government is among those benefiting. First Calculate What Cash Really Costs India Before approving any merchant charge, Narendra Modi should order a comprehensive and independent cost-benefit analysis of UPI. Officials must calculate not only what UPI costs to operate but what India saves because UPI exists. The study should examine the complete cost of maintaining a cash-dependent economy: printing currency notes, replacing damaged notes, transporting cash, protecting currency shipments, maintaining cash vaults, replenishing ATMs, operating cash counters and reconciling physical collections. It should calculate the cost of counting cash at shops, offices, banks, toll points and government facilities. It should account for theft, loss, counterfeiting, insurance, human error and the time businesses spend handling and depositing physical money. It should also examine the indirect costs created by anonymous and unrecorded transactions, including tax leakage and the difficulty of measuring parts of the informal economy. These figures must then be compared with the total annual public cost of supporting UPI. Only after that comparison can the government honestly determine whether subsidising UPI is expensive. There is every possibility that continued support for UPI would prove far cheaper than the economic and administrative costs of pushing even a portion of transactions back towards cash. The relevant calculation is not: How many thousands of crores does UPI support cost? The relevant calculation is: How many thousands of crores does India save because those payments no longer depend on cash? Without that analysis, imposing MDR would not be evidence-based policymaking. It would be bureaucratic guesswork. Subsidising UPI Is an Investment, Not a Freebie India’s policy establishment has developed an unfortunate habit of describing almost every form of public support as a subsidy burden while overlooking the economic activity such support generates. A subsidy is wasteful when it perpetuates inefficiency without creating corresponding public value. UPI does the opposite. It reduces friction. It increases convenience. It accelerates commerce. It expands digital participation. It enables even the smallest merchant to receive money directly into a bank account without purchasing specialised hardware. Supporting such a system is not fiscal irresponsibility. It is strategic investment. The government spends public money on highways because they improve mobility and commerce. It spends on ports because they facilitate trade. It spends on digital identity because it enables more efficient administration. It supports rural banking because inclusion produces wider economic benefits. UPI belongs in the same category. The government should create a predictable, multi-year funding arrangement for the UPI ecosystem rather than allowing uncertainty to return every few years. Funding could be shared between the government, banks and the largest commercial beneficiaries of the platform. But ordinary transactions should remain free at the point of use. That principle is worth preserving. Do Not Pretend That Merchants Alone Will Pay Officials may reassure the public that MDR will technically be charged to merchants rather than customers. That distinction will provide little comfort in the real economy. Businesses do not exist in an economic vacuum. When their operating costs rise, they respond. Some will absorb the charge temporarily. Others will increase prices, withdraw discounts, impose convenience fees, set minimum payment values or encourage customers to use cash. A merchant may not display a separate “UPI charge” on the invoice. The customer may nevertheless pay through a higher product price. Therefore, the claim that consumers will remain unaffected because MDR is levied on the merchant is misleading. Costs are passed through markets. The only debate is how visibly and how quickly. Large corporations may have the margins and scale to absorb a small payment-processing charge. Smaller businesses often do not. Even when exemptions are promised, classification errors, turnover thresholds, compliance requirements and changing rules can eventually drag more merchants into the chargeable category. Once the principle of charging UPI transactions is accepted, the exemptions can always be narrowed later. That is why the first toll booth matters. The ₹2,000 Threshold Is Bureaucracy at Its Most Artificial The reported possibility of using ₹2,000 as a threshold illustrates the weakness of rulemaking based on convenient numbers rather than real consumer behaviour. A ₹2,000 payment in India is not necessarily a luxury transaction. It could be a family’s groceries, a medical purchase, school material, a railway booking, an electricity bill, a household repair or dinner at a modest restaurant. Why should these transactions become economically different merely because they crossed an arbitrary number selected inside a government office? The threshold would also create predictable distortions. Some merchants may ask customers to split a ₹3,500 bill into two transactions. Others may prefer cash for larger payments. Payment apps and businesses may seek technical methods to route or classify transactions differently. Instead of simplicity, the system would acquire loopholes, exceptions and behavioural distortions. UPI succeeded because the user did not have to think about payment architecture. Scan, enter the amount and pay. Government babus now appear tempted to introduce exactly the kind of complexity that UPI eliminated. Small Merchants Must Be Fully Protected The neighbourhood shopkeeper, vegetable vendor, delivery worker, plumber, electrician, taxi driver and street-side seller must remain completely outside any UPI charging structure. These merchants adopted UPI because it lowered the barrier to accepting digital payments. There was no card terminal to purchase. No complicated settlement system to understand. No visible percentage disappearing from every small payment. A printed QR code was enough. That simplicity brought millions of people into the digital economy without forcing them through the infrastructure traditionally associated with electronic payments. Charging these merchants would be a spectacular policy reversal. It would tell the smallest businesses that after helping the government build a digital-payment culture, they must now pay for participating in it. P2P transfers, small merchants and routine household payments should remain free permanently, not merely until the next review. Banks Cannot Keep the Savings and Socialise the Costs Banks have a legitimate complaint that processing billions of UPI transactions requires infrastructure and expenditure. But banks must also disclose what they save because customers increasingly use UPI rather than branches, cash counters and ATMs. A customer transferring money electronically does not require a bank employee to process a cash deposit or withdrawal. A digitally settled payment does not require the same physical handling, security and reconciliation as currency. Banks should not be allowed to present UPI as an isolated cost centre while quietly retaining the savings created elsewhere in their operations. The government’s cost-benefit review must therefore examine the banking system as a whole. How much do banks spend operating UPI? How much do they save through reduced cash handling and branch activity? What commercial advantages do they gain by retaining customers within an increasingly digital financial ecosystem? Only the net cost should become the basis for any funding demand. Banks cannot privatise the benefits of digitisation while asking the government, merchants or consumers to socialise every associated cost. Fintech Valuations Cannot Become National Policy The discussion surrounding MDR also reflects the commercial interests of payment companies and fintech platforms. These companies have helped expand the ecosystem. They operate applications, invest in technology, acquire users and maintain merchant networks. They are entitled to seek sustainable business models. But India’s basic payment rail should not be redesigned primarily to improve fintech profitability, investor sentiment or future stock-market valuations. Reports already suggest that restoring MDR could create thousands of crores in annual ecosystem revenue and improve commercial prospects for payment companies. That may delight investors, but it does not automatically make the proposal sound public policy. Fintech platforms can monetise optional and value-added services. They can offer merchant analytics, lending, insurance, advertising, premium business tools, faster settlements and enterprise products. They can build profitable services around the UPI rail. What they should not be allowed to do is turn the basic act of transferring money into a toll simply because the platform has become indispensable. Public infrastructure may support private innovation. It need not guarantee private profit on every use. Let Large Corporations Contribute Differently A case can be made for requiring the largest corporations and high-volume commercial platforms to contribute towards UPI infrastructure. After all, major retailers, online marketplaces, airlines and large service companies benefit from immediate payment confirmation, lower cash handling, nationwide accessibility and efficient settlement. But even here, the contribution need not take the form of a visible percentage charge on each transaction. The government could create a turnover-linked annual infrastructure contribution for very large merchants. Banks could pay according to transaction volume or market share. Payment companies could contribute through licensing or network participation fees. The government could fund the remainder through a transparent annual allocation. Such a model would distribute costs without altering consumer behaviour at the payment screen. The objective should be to finance the system while preserving the experience that made it successful. Do not place a toll booth between the merchant and the customer merely because it is administratively easy to collect. Create a National UPI Sustainability Fund The Prime Minister should consider establishing a National UPI Sustainability Fund. The fund could receive contributions from the Union government, participating banks, NPCI, payment-service providers and the largest commercial users of the system. Its allocation formula should be transparent and linked to verified infrastructure requirements, fraud prevention, cybersecurity investment, dispute resolution and system resilience. Most importantly, part of the government’s contribution should be explicitly based on the estimated national savings generated by lower cash dependence. Suppose a detailed assessment shows that increased digital usage saves the public sector, banking system and wider economy a substantial amount annually. A fixed portion of those savings could be redirected into maintaining free basic UPI payments. That would create a logical and durable funding model. UPI would not be supported through arbitrary generosity. It would be funded from the efficiency dividend it creates. Publish the Numbers Before Changing the Rules Before any MDR is introduced, the government must publish the evidence on which the proposal rests. The public deserves to know the annual operating cost of UPI, the cost borne by different participants and the revenue expected from any proposed charge. It should also be told how much the government and banking system save through reduced cash usage, how merchant behaviour may change after MDR and whether customers are likely to return to cash for some transactions. Any cost-benefit study must be independent and public. It cannot rely solely on submissions from banks, fintech firms and payment processors with an obvious financial interest in restoring transaction charges. UPI belongs to the national economic infrastructure. Decisions concerning its future must therefore be subject to national scrutiny. If the case for MDR is genuinely overwhelming, publish the calculations. Until then, do not ask citizens to accept that charges are inevitable simply because someone in authority said “someone has to pay.” Do Not Disturb the Psychology That Made UPI Successful UPI’s success rests not merely upon technology but upon psychology. Users understand three things about it: It is instant. It works almost everywhere. It is free. That mental simplicity is immensely valuable. The moment customers begin wondering whether a transaction crosses a fee threshold, whether a particular merchant is classified as “large” or whether a convenience charge will appear, the relationship changes. The moment merchants start asking customers to pay cash, split transactions or use another method, friction returns. The government may believe that a small charge on a narrow category will have little effect. Perhaps initially it will not. But policy should account for the direction of travel. A 0.3% charge can become 0.5%. A ₹2,000 threshold can become ₹1,000. A large-merchant category can expand. A temporary arrangement can become permanent. Once toll collection becomes part of the architecture, future governments will always be tempted to extend it. The safest toll booth is the one never installed. Mr Modi, Do Not Let Accountants Defeat Statesmanship The difference between an accountant and a statesman is not that one understands numbers and the other does not. The difference is that the accountant counts the immediate cost, while the statesman recognises the wider value. Government officials may show Narendra Modi a spreadsheet explaining how much banks, NPCI and payment companies spend maintaining UPI. The Prime Minister should ask them to return with another spreadsheet. How much does India save through reduced cash handling? How much additional formal economic activity has UPI enabled? How much convenience has it created for citizens and small businesses? How much has it strengthened India’s technological reputation? How much strategic independence does India gain from possessing its own globally admired payment infrastructure? How much would it cost to rebuild public confidence if merchants and customers began returning to cash? Only after answering those questions can an honest decision be made. Leadership is not merely about balancing the expenditure column. It is about recognising which achievements deserve protection because their national value cannot be captured by a transaction fee. Do Not Put a Toll on India’s Finest Digital Highway UPI is not free because it has no cost. It is free because India made a deliberate policy choice to remove friction from digital payments. That choice produced extraordinary results. Now that the platform has succeeded, the government must resist the temptation to monetise the success simply because the transaction volume has become enormous. There is nothing irrational about using public money to sustain infrastructure that saves public money, strengthens formalisation and improves national productivity. Order the cost-benefit analysis. Calculate the true price of cash. Measure what the government, banks and businesses save because UPI exists. Use a portion of those savings to subsidise the network. Make banks contribute fairly. Ask very large corporations to support the infrastructure through a carefully structured mechanism. Allow fintech companies to earn from optional services rather than the basic transfer of money. But protect the ordinary user, the small merchant and the simplicity of the payment itself. Mr Prime Minister, UPI is one of the greatest achievements of your government. It is a technological success, an instrument of economic inclusion and a symbol of what India can build when public infrastructure is designed around the needs of its citizens. Do not allow officials who understand its expenses but underestimate its value to slowly weaken it. Do not celebrate the success of India’s finest digital highway by installing toll booths upon it. Protect UPI from the government babus. Calculate what it saves India, subsidise what it costs India and keep the basic payment rail free.

Dear Narendra Modi, Don’t Let Government Babus Put a Toll on UPI

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