Several shops in Ghaziabad have started displaying “UPI Payment Will Not Be Accepted” notices as traders protest the proposed Merchant Discount Rate (MDR) on selected UPI transactions above Rs 2,000 from October 15.
Traders are raising concerns over the proposed 0.4% charge and say the added cost, although officially payable by merchants, could eventually affect customers. Some are advising shoppers to carry cash, particularly for purchases above Rs 2,000.
Merchants argue that they may not want to absorb the additional cost and could instead prefer cash payments for larger transactions.
Under the proposed framework, a 0.4% MDR will apply to specified person-to-merchant (P2M) UPI payments above Rs 2,000. The charge will be paid by the merchant and capped at Rs 300 for transactions of Rs 75,000 and above. Person-to-person UPI payments will remain free.
Most routine UPI payments will also remain outside the proposed charge. P2M transactions up to Rs 2,000 account for more than 95% of transaction volume and will continue with zero MDR.
This means a customer paying Rs 1,500 through UPI would not face a new UPI fee. The proposed change mainly affects higher-value merchant payments.
The Centre is concerned that merchants could pass the cost on to customers through a separate “UPI charge”, potentially affecting the perception of UPI as a free payment option. The government has started discussions with payment aggregators and other platforms to prevent the cost from being transferred to consumers, while banks have also been advised to ensure merchants do not pass it on.
Officials estimate that around 4% of UPI transaction volume will be affected by the proposed MDR, as most payments are of lower value.
NPCI data for August shows 86% of P2M UPI transactions were below Rs 500, while another 10% were between Rs 501 and Rs 2,000.
RuPay debit card payments will continue to remain free regardless of transaction value.
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