From The Economic Times · Writankar Mukherjee · · 1m
Retailers may pass UPI MDR costs to consumers
Small Indian retailers could add extra fees for UPI payments over Rs 2,000 after new 0.4% charge
In brief
Small Indian retailers could add extra fees for UPI payments over Rs 2,000 after new 0.4% charge Retailers with thin margins may charge consumers for UPI transactions above Rs 2,000 to cover new 0.4% fee Originally reported by The Economic Times.
Retailers face thin margins
Retailers operate on net margins of 0.75-2.5% with little room to absorb new UPI fees
“Micro, small and medium retailers who are already struggling with low margins and high operational costs will have no choice but to pass on the MDR to consumers in whatever form possible”
Retailers likely to pass costs
Retailer associations warn small retailers will add fees for UPI transactions over Rs 2,000 to cover new 0.4% charge
“We have often seen small retailers ask for extra payment during credit card transactions. The same may now happen in UPI transactions of over Rs 2,000”
MDR impact on key sectors
Garments, footwear, phones, medicines and FMCG face higher costs as bill values often exceed Rs 2,000
“It’s a difficult situation as there is a huge cost associated with handling cash as well”
Retailers oppose MDR
Retailer bodies wrote to the Centre opposing the 0.4% UPI fee and plan a token strike next month
“Retailers who levy a surcharge on customers for card payments may also be acting contrary to applicable norms”
Cash alternatives risky
Retailers avoid splitting payments or using multiple QR codes to avoid MDR due to compliance issues
“Even breaking the payments into multiple transactions to avoid MDR, using multiple QR codes or paying to the proprietor’s personal UPI account is not advisable as those can be tracked and create compliance issues for retailers”
Government rules
Zero MDR applies to transactions under Rs 2,000 and small merchants earning under Rs 1 lakh monthly
“Merchants crossing the Rs 1 lakh threshold will pay the MDR”
The key point
Retailers with thin margins may charge consumers for UPI transactions above Rs 2,000 to cover new 0.4% fee
