Daijiworld Media Network - New Delhi

New Delhi, Oct 4: Unified Payments Interface (UPI) transactions could see a 10 per cent decline in monthly value and a 4 per cent drop in monthly volumes if the proposed 0.4 per cent merchant discount rate (MDR) on payments above Rs 2,000 comes into effect from October 15, LocalCircles CEO Sachin Taparia said.

The estimates are based on feedback from merchants and consumers collected through separate LocalCircles surveys ahead of the proposed rollout.

A LocalCircles survey released on October 2 found that only 14 per cent of UPI users surveyed would continue making payments above Rs 2,000 and bear the additional cost if merchants passed the MDR on to them. About 27 per cent said they would switch to cash, while 26 per cent would opt for credit cards and 14 per cent for debit cards.

The survey received more than 67,000 responses from UPI users across 291 districts. Overall, 76 per cent of respondents said they expected to shift larger payments to cards, cash or bank transfers if an additional cost was imposed on UPI transactions.

MDR is the fee paid by merchants to banks and payment companies for processing digital payments.

The government on September 14 protected UPI merchant payments of up to Rs 2,000 and RuPay debit card payments from charges. The proposed 0.4 per cent MDR will apply to person-to-merchant (P2M) UPI payments above Rs 2,000 from October 15. Small merchants receiving up to Rs 1 lakh a month through UPI QR codes will be exempt.

An earlier LocalCircles survey of merchants in August showed resistance to the proposed MDR. Around 41 per cent of merchants said they were unwilling to bear any MDR on UPI transactions above Rs 2,000, while only 17 per cent said they were willing to bear a 0.4 per cent MDR. Another 9 per cent said they did not accept UPI payments, while 15 per cent said the maximum MDR they were willing to bear was 0.04 per cent.

How large are UPI merchant transactions?

UPI processed 24.51 billion transactions worth Rs 29.82 trillion in August 2026. Merchant payments accounted for 15.51 billion transactions worth Rs 8.95 trillion. Payments above Rs 2,000 accounted for 67 per cent of the total value of merchant transactions.

The government has maintained that consumers should not bear the MDR. Finance Minister Nirmala Sitharaman said on September 22 that the charge would not be transferred to customers.

The government is also working with the Indian Banks' Association on a mechanism for banks to monitor merchants and ensure that the MDR is not passed on to consumers.