One in ten Indian vendors hit with extra UPI charges from suppliers

A survey by the Indian School of Business has found that 10.4 per cent of vendors face surcharges from suppliers when making payments through UPI, the country's most widely used digital payment platform. The additional charges represent a significant burden for small retailers and businesses already operating on thin margins, even as policymakers deliberate on new merchant discount rates for digital transactions.

The practice of charging extra for UPI payments contradicts the Reserve Bank of India's push toward digital payment adoption and highlights an emerging gap between policy intent and ground-level implementation. While suppliers cite various reasons for imposing these charges, the practice effectively penalises vendors who adopt digital payment methods, undermining the broader financial inclusion agenda.

The issue gains additional significance as the government has deferred implementation of a new MDR framework until after the Diwali festival period. This delay was intended to provide breathing room for stakeholders, but interim practices such as vendor surcharges suggest that the cost pressures on smaller businesses remain unaddressed.

Industry observers note that such charges may violate existing regulations governing payment system fees, yet enforcement remains inconsistent. The survey findings are likely to intensify scrutiny on supplier practices and may prompt regulators to strengthen oversight of the payments ecosystem before the MDR framework takes effect.