Speaking in Udupi, the former Tamil Nadu BJP chief said imposing Merchant Discount Rate charges on digital payments could undermine the free-use model that helped UPI spread among everyday consumers.
K Annamalai has used a retailers’ gathering in coastal Karnataka to press the Union government to spare small traders from Merchant Discount Rate charges on Unified Payments Interface payments, arguing that the cost of collecting revenue from digital transactions could do more harm than good. Speaking in Udupi on Saturday, the former Tamil Nadu BJP chief said the rapid rise of UPI had been built on the promise of free use, and he warned that adding a fee could weaken the very system that helped bring digital payments into everyday life.
According to the policy now in force, the government has introduced a revised MDR framework for certain merchant UPI transactions above Rs 2,000, while insisting that customers will not pay the charge and that small merchants remain exempt. The government has said around 96% of merchant transactions will not be affected, but Annamalai argued that the change still risks burdening retailers with tight margins. The National Payments Corporation of India has also deferred the rollout until after Diwali, extending the uncertainty around how the new rules will be applied.
Annamalai, who described the estimated Rs 15,000 crore involved as small compared with the Centre’s roughly Rs 50 lakh crore budget, said the government should treat support for digital payment infrastructure as an investment rather than a cost. He urged the finance and commerce ministries to work together on relief for small traders and said local businesses were central to employment and to keeping money circulating within communities. He also linked the issue to a broader argument about domestic industry, saying India should move beyond Make in India towards a stronger emphasis on Make for India.
His comments carried added political weight because Udupi is a familiar setting for him. Annamalai began his police career in the district more than a decade ago and later served there as superintendent of police, building a reputation for tough policing and public engagement. The former officer has since moved from the police service into politics, joined the BJP and led its Tamil Nadu unit before stepping down in April 2025, and his return to Udupi to criticise a policy backed by the BJP-led Centre places him in a notably sensitive position in a region where the party has long been strong.
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