UPI MDR Charges: Will consumer prices rise at stores if merchants start paying a nominal fee? Govt answers

The proposed UPI MDR framework sets charges for certain merchant payments above ₹2,000. Here's whether consumer prices at stores will rise if merchants start paying a nominal fee. 

The central government announced in September that it would end more than six years of zero-fee UPI usage by introducing a 0.4% surcharge on merchant transactions above ₹2,000, capped at ₹300 for payments of ₹75,000 and above.

The decision led to immediate pushback from local business owners, who argued that the extra charge could eat into their margins on products and services.

The UPI network powers payments for more than 500 million consumers purchasing everyday items, from street tea and food to smartphones and home appliances, across Asia's third-largest market.

While the government has assured consumers that UPI transactions will remain free, as they have been so far, concerns persist that merchants may pass on the additional charge to buyers. This could eventually push up the cost of everyday essentials and other products as well as services.

NPCI addresses concerns over hiked prices at stores

The National Payments Corporation of India (NPCI), which facilitates services such as UPI payments, has responded to concerns that MDR on high-value UPI transactions could lead merchants to increase prices of products and services, potentially passing on the additional cost to consumers.

In its FAQs document published last month, it noted that market dynamics and historical payment trends show that merchants absorb nominal digital processing costs to drive higher business volume.

“Payment acceptance costs are considered standard operational overheads that are offset by increased footfall, higher average ticket values, and reduced cash-handling risks,” the FAQ's response read.