US, Oct. 2 -- Imagine a hardware shop in a district town receiving about Rs 1.1 lakh a month via UPI. If its monthly UPI receipts stay above Rs 1 lakh for three consecutive months after October 15, it moves out of the zero-MDR category. Eligible payments above Rs 2,000 can then attract the new 0.4 per cent merchant discount rate (MDR). The owner may start asking whether to collect some receipts in cash or through a personal UPI account instead.

That is what much of the debate misses. The issue is not that a 0.4 per cent MDR is large. It is that the charge sits alongside two visible thresholds: Rs 2,000 per payment and Rs 1 lakh in monthly merchant receipts, while cash and personal accounts remain easy alternatives. A small price can the...