The former BharatPe co-founder says merchants could eventually pass payment-processing costs to customers, while the government maintains that consumers will not be directly charged.
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Former BharatPe co-founder Ashneer Grover has questioned the government’s new framework for charging merchants on certain UPI transactions above ₹2,000, arguing that consumers could ultimately bear the cost.
Grover made the remarks during a television interview while discussing the government’s clarification that person-to-person UPI payments will remain free regardless of the transaction amount.
His comments have added another dimension to the debate over how India’s rapidly expanding UPI ecosystem should be funded.
What Did Ashneer Grover Say About the UPI Fee?
During an interview with Times Now, Grover challenged the distinction between a merchant charge and a consumer tax.
When asked about the argument that the fee would apply only to those who could afford it, he questioned why the levy should be described as a payment charge rather than a tax.
Grover’s broader argument was that a cost imposed on businesses can eventually influence the prices paid by customers.
He illustrated his point by comparing the situation with other costs that businesses face and argued that the final economic burden can sometimes reach consumers.
A video of the discussion subsequently circulated widely online.
Government Says Consumers Will Not Be Directly Charged
The government’s position differs from Grover’s interpretation.
MDR, or Merchant Discount Rate, is a payment-processing charge within the digital-payment ecosystem. According to the government’s explanation cited in the supplied material, it is not a tax collected by the government or NPCI.
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The new framework applies to specified merchant transactions above ₹2,000.
Importantly, the government has said that person-to-person UPI transactions are not covered by the merchant charge, regardless of their value.
Therefore, someone transferring ₹5,000 to another individual through UPI would not face the merchant fee simply because the transaction exceeds ₹2,000.
Why Does Grover Believe Consumers Could Still Be Affected?
Grover’s criticism centres on the distinction between who is formally charged and who ultimately bears an economic cost.
His argument is that if merchants have to pay a fee for accepting certain digital payments, businesses could potentially factor that additional cost into their pricing.
He used petrol taxation as an example during the interview, arguing that costs imposed higher up the supply chain can eventually be reflected in the price paid by consumers.
This is Grover’s argument about the potential downstream effect of the merchant charge; it is not the same as the government announcing a direct UPI fee for consumers.
Grover Questions the Cost of Supporting UPI
Grover also raised questions about the broader economics of India’s digital-payment infrastructure in a subsequent post on X.
He cited several figures while challenging the argument for introducing a merchant fee, including claims regarding:
RBI surplus transferred to the government
Profits reported by listed banks
NPCI’s pre-tax surplus
According to the figures cited by Grover, the RBI surplus to the government was ₹2.87 lakh crore, while total listed bank profits stood at ₹4.11 lakh crore.
He also cited an NPCI pre-tax surplus of ₹1,888 crore.
Grover used these figures to question where the financial burden of UPI currently falls and whether a subsidy is necessary to support the payment system.
The figures and conclusions were presented by Grover as part of his argument against the new charge.
Grover Also Raises the ATM Cost Comparison
In another part of his criticism, Grover pointed to the cost associated with maintaining traditional cash infrastructure.
He argued that operating ATMs and managing physical cash involves substantial expenditure and suggested that greater reliance on UPI could provide an alternative to some of those costs.
His comments form part of a wider debate over the economics of India’s transition from cash-based transactions to digital payments.
How Much Is the New UPI Merchant Charge?
The supplied material refers to a 0.4% MDR for qualifying UPI transactions above ₹2,000.
However, the important distinction is that the charge is structured as a merchant-side payment-processing fee, rather than a direct transaction fee automatically deducted from a customer’s bank account.
The new mandate is scheduled to take effect from October 15.
Will Every UPI Payment Above ₹2,000 Be Charged?
No.
The merchant fee does not mean that every UPI transaction above ₹2,000 will automatically result in a charge to the person making the payment.
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The framework distinguishes between different types of transactions and merchants.
In particular:
Person-to-person UPI payments: Remain free regardless of amount, according to the government clarification.
Certain merchant payments above ₹2,000: Subject to the applicable merchant-fee framework.
Smaller merchant transactions: Many remain outside the new charge under the stated framework.
Consumer bank accounts: No general direct UPI fee has been announced merely because a payment exceeds ₹2,000.
Around 96% of Merchant Transactions Expected to Remain Unaffected
The government has stated that approximately 96% of merchant transactions will remain unaffected.
The reason given is that transactions may either fall below the ₹2,000 threshold or be covered by the existing zero-MDR framework for small merchants.
This means the headline ₹2,000 threshold does not imply that a new charge will apply to the majority of UPI transactions.
What the Debate Means for UPI Users
For consumers, the immediate distinction is between direct charges and the possible indirect effect of merchant costs.
The government says the new framework does not impose a consumer transaction fee.
Grover, meanwhile, argues that businesses facing higher costs could eventually transfer those costs through pricing.
Whether merchants actually pass the cost on to customers will depend on how businesses respond to the new payment economics.
When Will the New Merchant Fee Take Effect?
The new merchant-fee mandate is scheduled to begin on:
October 15, 2026
Until then, businesses and payment providers have time to prepare for the revised framework.
The implementation is expected to be closely watched because UPI has become a major part of India’s retail-payment system.
The Bottom Line
Ashneer Grover has questioned the new UPI merchant fee above ₹2,000, arguing that a cost imposed on merchants could eventually reach consumers through higher prices.
The government’s position is that the fee is a merchant-side MDR rather than a consumer tax or direct UPI transaction charge. Person-to-person UPI payments are also expected to remain free regardless of transaction value.
The new framework is scheduled to take effect on October 15, while the government says around 96% of merchant transactions will remain unaffected.
The central debate, therefore, is not simply whether consumers will see a fee deducted from their UPI payment, but whether businesses could indirectly reflect payment-processing costs in the prices they charge.
Frequently Asked Questions
Will consumers be charged for sending ₹5,000 through UPI?
According to the government clarification cited in the supplied material, person-to-person UPI payments remain free regardless of the amount. A merchant-side fee does not automatically create a consumer transaction charge.
What is the new UPI merchant fee?
The supplied material refers to an MDR of 0.4% for applicable UPI merchant transactions above ₹2,000.
What does Ashneer Grover say about the UPI charge?
Grover argues that although the formal charge may be imposed on merchants, businesses could potentially pass the additional cost on to customers through their prices.
Is MDR a tax?
According to the government’s position cited in the supplied material, MDR is a payment-processing charge within the payment ecosystem and is not a tax collected by the government or NPCI.
When does the new UPI merchant-fee framework take effect?
The mandate is scheduled to take effect on October 15, 2026.
Will the fee apply to all UPI transactions above ₹2,000?
No. The framework concerns specified merchant transactions. Person-to-person transactions remain outside the merchant-fee provision, according to the government clarification.
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