Hyderabad: The Centre is sticking to its decision to introduce a 0.4% Merchant Discount Rate (MDR) on specified UPI person-to-merchant (P2M) transactions above ₹2,000 from Oct 15, raising concerns among traders in Hyderabad that the additional cost could further squeeze margins in a highly competitive market.
“The UPI ecosystem has several players, including banks, payment aggregators, payment service providers and NPCI, and all of them benefit from the growth of digital payments in different ways,” said economist E Ravathi. “Banks save on the costs involved in handling and transporting cash, while RBI saves on replacing currency. There are also benefits in terms of greater transparency and tax compliance. So, if the overall benefits of UPI are higher than the costs involved in running the system, there is a case for keeping it free rather than passing the cost on through an MDR,” she added.
Consumers, meanwhile, said they were not directly affected by the MDR but were sceptical about whether merchants would eventually try to pass on the cost to buyers. Usually, when a product cost rises, the customer is expected to pay the charges, and merchants will find a loophole to avoid the MDR,” said Jayadev, an IT employee. “Clarity is still awaited, but hopefully, the buyer shouldn’t be in a position to pay the extra amount.