Former RBI Governor C. Rangarajan urges GST Council to exempt 0.4% MDR fees
GS3Economy · S&T · Environment · Security· Monetary policy, RBI & banking· Mains·
Digital Public Infrastructure (DPI) vs. monetization: a GS3 and Ethics case study on financial inclusion.
Why in news
Former RBI Governor C. Rangarajan urged the GST Council to exempt the 0.4% Merchant Discount Rate (MDR) fees on UPI transactions above ₹2,000 from tax to prevent financial friction.
Background
The UPI Payment Rules 2026 stipulate a 0.4% MDR fee for person-to-merchant transactions exceeding ₹2,000 starting October 15, 2026. Currently, 75% of UPI transactions are below the ₹2,000 threshold.
Facts for Prelims
- FactUPI Payment Rules 2026 stipulates a 0.4% MDR fee for person-to-merchant transactions above ₹2,000.
- Fact75% of UPI transactions are currently below the ₹2,000 threshold.
- BodyNational Payments Corporation of India (NPCI) manages the UPI system.
Prelims practice question
Which body is responsible for managing the Unified Payments Interface (UPI) system in India?
- (a)National Payments Corporation of India
- (b)Securities and Exchange Board of India
- (c)Reserve Bank of India
- (d)Unified Payments Council
Show answer
Answer: (a) National Payments Corporation of India — The note identifies the National Payments Corporation of India (NPCI) as the body that manages the UPI system.
For Mains
Q. Discuss the trade-offs between sustaining the cost of Digital Public Infrastructure (DPI) and ensuring financial inclusion for marginalized groups in India.
Dimensions to cover in your answer
- Financial inclusion vs. infrastructure sustainability: Balancing the cost of maintaining UPI with the need for zero-cost access for low-value transactions.
- Digital divide: Risk of gender and socio-economic exclusion due to uneven access to digital public infrastructure.
- Fiscal policy impact: Potential for GST on MDR fees to increase transaction costs for merchants and end-users.
Keywords: Digital Public Infrastructure · Merchant Discount Rate · Financial Inclusion · Digital Divide · Monetization of Public Goods
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