MDR fee on UPI: Why opposition's arguments are weak

An AI-generated image of a customer making
a payment at a retail store using UPI.

There is a debate currently underway in India after the Union government on Monday introduced what is called MDR, or Merchant Discount Rate, for retail purchases above Rs 2,000 using UPI. 

UPI or Unified Payments Interface, is a money-transaction platform developed in India in 2016. UPI allows people to send money from their bank account directly to another person's bank account using a mobile app. All that is needed is the recipient's mobile phone number or their UPI ID or a QR code that embeds the account details.

CASHLESS IN INDIA

UPI is hugely popular in India, making all transactions — ranging from very small amounts to high value — cashless. Last month the platform processed a record 24.51 billion transactions worth ₹29.82 lakh crore, which is roughly the equivalent of $311 billion, £232 billion or €270 billion.

What the government's decision on Monday means is that from October 15, if I have to pay an amount of more than Rs 2,000 at a large retail store and I choose to pay by UPI, the store owner (not I) will have to pay a small fee to payment facilitators like banks and tech platforms.

An MDR already exists for credit and debit card transactions for any amount, which varies between 1.5% and 2.5%. The amount the merchant has to pay is not capped. For UPI, the MDR is 0.4% and that too only for transactions above Rs 2,000. It is capped at Rs 300.

The government introduced the 0.4% levy to generate funds for the maintenance of the entire payment infrastructure, especially as the volume of UPI transactions has been growing exponentially. In fact, almost every month or two, a new record for the number of transactions and the volume of money transferred is set. The government as well as technology companies say they need funds to make the system more robust and secure. That's understandable.

The opposition, mainly the Congress, has opposed the government's decision and asked for the MDR to be rolled back.

Here is what the opposition has been saying:

ONE

The opposition parties are making it appear as if customers will have to pay this extra fee called MDR.

It is not the customers, but businesses, specifically large ones. Small vendors have been exempted, so too person-to-person transactions, irrespective of the amount.

TWO

The opposition says UPI was always free, there was never an MDR; and once the government realised UPI had caught on in a huge manner, they introduced a fee. 

This is not factually correct. When UPI was introduced in 2016, there was an MDR. It was only during COVID, from January 1, 2020, that the MDR was waived, with the government covering the costs incurred by banks.

THREE

The opposition says businesses will pass the extra fee on to customers. 

This is very unlikely because it is illegal to do so according to the government notification. Large businesses that have to pay the MDR have the trade volume bandwidth to absorb the fee. Also, if these businesses never passed on the fee when customers chose to pay by card, why would they do it now for UPI? If businesses pass the buck, then the opposition will have a clear reason to protest, not now.

FOUR

The opposition says the government is trying to help card companies like Visa and Mastercard by introducing an MDR for UPI. 

It is true that the businesses of Visa and Mastercard have been hit after UPI became popular, but the opposition has not explained how an MDR for UPI will help Visa and Mastercard.

It is also true that the top two UPI companies are PhonePe and Google Pay. PhonePe, which is now owned by Walmart holding an 85% stake, was founded in 2015 by two Indian entrepreneurs before changing hands. Google Pay in India is managed and operated by Google India Digital Services Private Limited, a wholly owned subsidiary of Google.

If people are happy to use these American apps, what is wrong with those companies making some money?

FIVE

The opposition says US pressure is behind the government's decision. 

I do not know how the American government will benefit from this. If anyone benefits, it is the Indian government, Indian banks, and the many smaller Indian technology companies that are part of the vast UPI infrastructure.

REAL REASONS FOR PUSHBACK

Though I do not find any substantial merit in the opposition's arguments, I do understand why the government's decision has kicked up such a row.

UPI arrived only in 2016, but long before that, credit and debit cards were being used at large retail stores and for online transactions. In fact, I had stopped using cash long before UPI arrived.

My logic was simple: why withdraw cash from an ATM and pay the cashier at the store when I can pay the cashier directly from my bank account using a debit card? For large-value transactions, I use credit card.

However, the number of people who used cards was, and still is, relatively small. That is where UPI has made the difference. Unlike credit and debit cards, UPI replaced cash transactions in a really big way.

Imagine, 24.51 billion transactions across India in a single month of August is a staggeringly huge number (India's population is 1.5 billion). In contrast, there were about 600 million credit card transactions. Incidentally, credit card transactions (which have a much higher MDR) too have been going up though not in the way UPI has been.

So, the real reasons for the opposition's pushback, I think, are simply these two:

1) Even the slightest fee on anything that is widely popular across the country is a political taboo. It triggers a widespread "how dare you do it" sort of protest.

2) When the government levies a fee, there is opposition, but no one cares when private entities charge even hefty amounts. The same people who oppose a small government levy happily pay multiple times that amount when a private entity charges it.

I find nothing wrong with the government introducing this small, capped MDR on large retail businesses. It will only go towards strengthening the burgeoning online money transaction system that has proved to be so user-friendly to millions of Indians.

Homemaker: Evolving definitions

Image courtesy: Pixabay

Decades ago, in our school and college days, the word "homemaker" wasn't very commonly used. We were more familiar with the word "housewife".

"Homemaker" was used as a formal and polite alternative to "housewife".

Recently, a judgment by the High Court of Karnataka gave the word "homemaker" a powerful, respectful, and a totally new dimension.

Before we get to that, a few dictionary definitions.

Merriam-Webster defines a homemaker as "one who manages a household especially as a spouse and parent".

The Cambridge Dictionary goes a step further adding an economic angle: a homemaker is "a person who manages a home and often raises children instead of earning money from a job".

According to Longman, especially American English, homemaker is a woman who works at home cleaning and cooking etc and does not have another job.

​Oxford Learner's Dictionaries also refers to the word as an American expression, and says, "homemaker is a person who manages a home and takes care of the house and family as their main job."

Collins says, "A homemaker is someone who spends a lot of time looking after their home and family. You usually use homemaker to refer to someone who does not have a job outside the home."

Wikipedia is quite clear, It says the word is primarily a North American and Canadian term used for a housewife, househusband, or stay-at-home mom or dad who manages day-to-day domestic operations.

The word has interesting origins. 

In 1861, homemaker was a man who landscaped and gardened his property. From1868, the word began to be identified with a woman who managed and took care of the home.

The underlying belief was quite clear; that a homemaker is someone, mostly a woman, who stays at home, does not earn a salary, and does not have a "professional" career.

NEW DIMENSIONS

The Karnataka High Court has given more dimensions to it. 

The case pertained to motor accident compensation case dating back to 2013. A woman, who held a Master’s degree in Biotechnology and had worked as a guest lecturer, was injured in a bus accident. 

Since she was not employed at the time of the accident, the transport corporation argued that because of her high educational qualifications, she could not be considered a "homemaker".

The High Court disagreed, and listed out three principles that redefine homemaking.

1. Education doesn't matter

The court ruled that every woman who cares for her family at home is a homemaker, regardless of her qualifications. Whether she holds a basic school degree, a postgraduate degree, or a doctorate, her contribution to the home remains invaluable. You do not have to be projected as uneducated to fit the role of a homemaker.

2. Professionals too can be homemakers

The court said a working professional is a homemaker as long as she renders services at home and looks after the welfare of her family. Homemaking and a professional career are not mutually exclusive — millions of people do both every single day.

3. The word is gender-neutral

Though the case pertained to a woman, a homemaker can be male or female, and the term covers working individuals, breadwinners, and wage earners alike.

LOVE AND SACRIFICE

Instead of linking the word to earnings, the Karnataka High Court connected it to what individuals bring to our lives. 

The court said:

"Any individual who tirelessly strives, showers unconditional love, sacrifices personal comfort at times and ultimately becomes a pillar for a happy and stable family is a homemaker."

The ruling shifts the definition from a list of chores (like cooking, cleaning, or laundry) to emotional and structural foundation of the family.

NATION BUILDERS

In June this year, the Supreme Court called homemakers the true "nation builders". Judges said, "We are of the view that the housewife contributes to the growth of the human being and the nation.”

The apex court went on to even say that unpaid domestic work performed by homemakers must be valued at a minimum of ₹30,000 per month under a separate head for "domestic care" when calculating compensation for road accident deaths.

India at 79: Economic strides vs social realities

Image source: Pixabay

On the 15th of August, India will enter the 80th year of its Independence. As every year, the air will be rent with patriotic songs; there will be the nation's Tricolour aflutter almost everywhere, and there will be lofty speeches that ooze nationalistic fervour. Everyone gets involuntarily drawn into the celebratory atmosphere.

No doubt, during the past 79 years, we have made tremendous progress in almost all walks of life. India is today a self-reliant nation, almost on a par with any developed nation. That's something to be really proud of.

IT'S A DIFFERENT INDIA TODAY

Be that as it may, all is not very well. India today is not the same India as it was many years ago. While a lot of good things have happened and are happening, as if to counter them, in many ways we are sliding back in some aspects. The entire socio-political-economic landscape has undergone a huge change. The extent of this change has only accentuated in the past two decades, which is worrying.

My anecdotal experiences tell me that Indians by and large have become prosperous. The newer generations, be it in cities or villages, are far better off economically than the previous ones. There is a lot of economic prosperity, which is a really good thing.

FREEDOM TO QUESTION

What is worrying are the changes in the socio-political space. More and more people have become less and less accommodative and inclusive. Their tolerance levels have dropped, and they are unable to see a point of view that is different from theirs. Worse, a person with a different opinion is harshly and unfairly judged and condemned.

Take for example, if one criticises the policies of the Union government, there are a large number of people willing to brand you as anti-national. This was never the case earlier, say when Indira Gandhi was the Prime Minister. She too was nationalistic and authoritarian. Not even during the time of Atal Behari Vajpayee (who headed a right-wing BJP-led coalition government).

ENFORCED NATIONALISM

Today, for some inexplicable reason, after 79 years of steady progress as a nation, an inferiority complex is being injected into the social fabric; so much so that thrusting nationalism on people has almost become a state policy.

I don't understand where this sense of insecurity is coming from. If our country is more developed and stronger, as the government claims and to which I do agree, the government should actually be more confident and accommodative.

FREEDOM WITHOUT RESPONSIBILITY

While on one side we have freedom of expression against ruling parties being limited, on the other side, a lack of strong enforcement of rules has given people the freedom to do anything and get away with it.

Freedom comes with a lot of responsibility; on the part of the government functionaries as well as citizens. One area where India really lags behind is in civic sense. The sense of discipline, societal well-being, social responsibility, civic duty, and a concern for other people, are very much in short supply. Examples are aplenty all around us, like the way motorists drive, the way garbage is disposed of, the way we behave in public spaces, etc.

As we enter the 80th year of Independence, there is of course a lot to celebrate. But there is just as much to introspect on, and plenty of scope to make course corrections as well -- for the government, the politicians, the public servants and the citizens.

(This post is a part the Blogchatter Blog Hop)