0.4% UPI charge for some merchants: Could this push India back towards cash?
The Indian government has introduced a 0.4% Merchant Discount Rate (MDR) for UPI transactions exceeding Rs 2,000, aiming to make the payment system financially sustainable. This decision follows an amendment to the Payment and Settlement Systems Act, 2007. While individual consumers and person-to-person transactions remain unaffected, merchants handling transactions over Rs 75,000 will bear the MDR cap of Rs 300. The move seeks to cover only 11% of operational costs currently subsidized by the government, with investments needed for security and infrastructure upgrades. Critics argue that imposing costs on a widely used system could deter adoption and undermine efforts toward a cashless economy, especially as 96% of UPI transactions are under Rs 2,000. The policy emphasizes simplicity and affordability for most users but raises concerns about potential cost-passing to consumers.
Starting October 15, a new rule affecting UPI transactions above Rs 2,000 will come into effect, introducing a 0.4% Merchant Discount Rate (MDR) for certain merchants. This change applies specifically to person-to-merchant (P2M) UPI payments exceeding the Rs 2,000 threshold. According to the National Payments Corporation of India (NPCI), the MDR will not exceed Rs 300 for transactions of Rs 75,000 or more. The new regulation aims to address the sustainability of the UPI system, which has grown significantly since its introduction. Merchants have expressed concerns about the impact of this new fee structure. In Ghaziabad, several traders have already begun preparing for the change, with some announcing they will refuse UPI payments starting October 15. Sanjay Bindal, a grocery shop owner in Vijay Nagar's sector-9, posted notices indicating he will not accept UPI payments from customers after the deadline. He explained that the MDR cost would have to be absorbed by him, leading to potential adjustments in pricing strategies. Similar sentiments were echoed by other traders, including Rajnish Bansal from Turab Nagar Market, who noted that the MDR would likely force them to either reduce discounts or raise prices, thereby impacting consumer experience. The fuel pump association in Ghaziabad also voiced its concerns, with Vipin Sharma, president of the Ghaziabad diesel-petrol dealer association, stating that they would not accept UPI payments exceeding Rs 2,000 from October 15. These actions reflect broader unease among merchants regarding the implications of the new MDR regulations on their operations and profitability. According to NPCI, the new framework does not impose a daily limit on repeated UPI payments made to the same merchant. This means that businesses could theoretically break down larger payments into smaller ones of Rs 2,000 or less to avoid the MDR. However, industry experts suggest that such practices might not become widespread due to logistical challenges and the need for mutual agreement between merchants and customers. An individual close to NPCI indicated that while such workarounds exist, they are unlikely to significantly alter the overall transaction landscape. Another area of concern involves the zero-MDR P2PM category available to small merchants. Banks and payment service providers monitor UPI collections for these merchants and may transfer them to the regular merchant category if their monthly collections exceed Rs 1 lakh for three consecutive months. The lack of clarity on whether these collections should be aggregated across different bank accounts, QR codes, or payment service providers opens the door for potential loopholes. Merchants could potentially spread their receipts across various channels to stay under the threshold, though detecting such arrangements would require linking all accounts and payment channels to the same business entity. Additionally, directing business payments to personal UPI IDs could allow merchants to treat commercial receipts as personal transfers, thus avoiding the MDR. However, this approach risks misclassifying the transaction and could lead to subsequent reclassification by banks or payment providers. Merchants might also benefit from being incorrectly assigned to a merchant category that attracts a flat Rs 5 charge instead of the 0.4% rate applicable to certain sectors like railways, telecom, insurance, fuel, and utilities. Deliberately providing an incorrect classification would violate the rules, and genuine recurring UPI AutoPay transactions are exempt from the charges, although misrepresenting an ordinary sale as a recurring payment would be considered misclassification. Despite these concerns, NPCI does not anticipate widespread adoption of such workarounds. Over 95% of merchant-payment volumes will remain free under the new framework, suggesting that the impact of the MDR may be limited. The government's decision to implement the MDR follows an amendment to the Payment and Settlement Systems Act, 2007, aimed at ensuring the long-term viability of the UPI system. While the move addresses the need for investment in security and infrastructure, it also raises questions about fairness and the potential burden on consumers if merchants pass on the costs. Continuous monitoring will be essential to ensure that the system remains accessible and beneficial to the majority of users.
The National Payments Corporation of India (NPCI) has announced that starting October 15, 2026, UPI payments exceeding Rs 2,000 to large merchants will be subject to a 0.4% Merchant Discount Rate (MDR), with a maximum charge of Rs 300 for transactions over Rs 75,000. However, there is no daily cap on UPI payments, which allows merchants to split larger payments into multiple transactions of Rs 2,000 or less to avoid the MDR. For instance, a Rs 6,000 payment could be divided into three Rs 2,000 payments, each falling under the free limit. Industry experts suggest that while such workarounds exist, they are unlikely to become widespread. Additionally, small merchants can exploit the zero-MDR P2PM category by distributing receipts across different payment channels or using personal UPI IDs to avoid charges, though this risks misclassification and potential penalties.
Bias read (Center): The article presents factual information about upcoming changes to the UPI payment system and discusses potential loopholes and workarounds. It does not overtly favor any political ideology or group, nor does it emphasize specific viewpoints beyond the technical aspects of the policy. The framing is
Why factuality (85): The article accurately reports the details of the upcoming UPI MDR changes, including the Rs 2,000 threshold and the lack of a daily cap on repeated payments. It cites industry sources and mentions the NPCI framework and FAQs, aligning with the cross-source consensus. However, it lacks specific date
Why objectivity (80): The article maintains a neutral tone overall, presenting facts and quotes from industry insiders without overt bias. It explains the implications of the policy but avoids taking a stance on whether the policy is good or bad. Some phrasing like 'workarounds' may imply judgment, but it remains mostly
Merchants in Ghaziabad, including grocery store owners and fuel pump operators, are expressing concerns over a new 0.4% Merchant Discount Rate (MDR) on UPI transactions exceeding ₹2,000, which takes effect on October 15. Shopkeepers like Sanjay Bindal and Rajnish Bansal plan to stop accepting UPI payments from that date, citing the financial burden of the MDR as they cannot pass the cost onto customers. The National Payments Corporation of India (NPCI) confirmed that customers will not be charged for these transactions, but merchants will absorb the cost. This decision could impact cash flow and contradict efforts toward a cashless economy, as some traders argue that increased costs may lead to higher prices or reduced discounts. Associations are seeking intervention from authorities, highlighting broader concerns among small businesses.
Bias read (Center): The article presents the concerns of merchants without overtly endorsing or criticizing the government's policy. While the MDR change is a politically sensitive economic measure, the reporting focuses on the practical implications for businesses rather than taking a partisan stance. Multiple voices,
Why factuality (80): The article provides specific examples of merchants in Ghaziabad reacting to the new MDR rules, citing Sanjay Bindal and Vipin Sharma. These details align with the broader context of the UPI MDR implementation. However, some details are speculative, such as the claim that the MDR cost will be passed
Why objectivity (65): The article leans toward the perspective of affected merchants, using direct quotes and emphasizing their concerns. While it presents facts, the tone is sympathetic to the merchants' grievances, potentially undermining neutrality. Phrases like 'we will have to bear the cost' suggest a framing that h
Deccan HeraldIndependentCenterFactual: no official source document/info detectedObjective 85
The Indian government has introduced a 0.4% Merchant Discount Rate (MDR) for UPI transactions exceeding Rs 2,000, aiming to make the payment system financially sustainable. This decision follows an amendment to the Payment and Settlement Systems Act, 2007. While individual consumers and person-to-person transactions remain unaffected, merchants handling transactions over Rs 75,000 will bear the MDR cap of Rs 300. The move seeks to cover only 11% of operational costs currently subsidized by the government, with investments needed for security and infrastructure upgrades. Critics argue that imposing costs on a widely used system could deter adoption and undermine efforts toward a cashless economy, especially as 96% of UPI transactions are under Rs 2,000. The policy emphasizes simplicity and affordability for most users but raises concerns about potential cost-passing to consumers.
Bias read (Center): The article presents the government's rationale for introducing the MDR as a necessary measure for financial sustainability, while acknowledging potential negative impacts on user adoption. It does not overtly favor either side but highlights both the necessity of investment and the risk of detaring
Why factuality: no official source document/info detected
Why objectivity (85): The article presents the information in a mostly neutral manner, though it does highlight the benefits of UPI and the necessity of protecting small vendors, which may slightly tilt the tone toward supporting the policy. However, it still includes counterpoints like the sustainability concerns and th
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