The Global Trade Research Initiative (GTRI) has called upon the government to withdraw the upcoming Merchant Discount Rate (MDR) charges on UPI transactions, scheduled to take effect on October 15, warning that introducing these fees could threaten small business earnings, squeeze household budgets, and weaken consumer demand.
Key Concerns Raised by GTRI
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Impact on Small Businesses and Prices: While individual peer-to-peer (P2P) transfers and smaller payments remain protected, GTRI argues that applying a 0.4% MDR on merchant payments above Rs 2,000 will force merchants to either absorb lower earnings or pass the costs onto consumers through higher retail prices.
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Loss of UPI’s Competitive Edge: The think tank cautions that eroding UPI’s price advantage over conventional payment rails could inadvertently benefit dominant US card networks (like Visa and Mastercard) and major third-party apps.
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Call for Transparency: GTRI has also advocated for an independent public audit to accurately establish and publish the actual running costs of maintaining the UPI infrastructure before introducing transactional fees.
Context on the October 15 Changes
The debate surrounds the framework taking effect on October 15, which introduces a 0.4% MDR on eligible person-to-merchant (P2M) UPI transfers exceeding Rs 2,000 (subject to a maximum cap of Rs 300, with exemptions or flat fees for specific sectors like utilities and fuel). While the government and regulators maintain that standard everyday payments and all consumer transactions remain entirely free, industry stakeholders continue to debate the long-term impact of introducing commercial costs into India’s digital payments ecosystem.
