Small traders face new UPI merchant fees from mid-October

A new merchant discount rate (MDR) structure for Unified Payments Interface transactions will take effect on October 15, imposing charges on digital payments exceeding ₹2,000 for qualifying businesses across India. The measure represents a departure from the zero-MDR policy that has long characterised UPI transactions, potentially affecting millions of small traders and retailers.

The applicability of the new fee structure depends on several factors, including merchant category, transaction volume, and business registration status. Small shopkeepers can verify their eligibility by checking their merchant classification codes and transaction history with their payment service providers. Businesses operating under specific exemptions or those processing below certain transaction thresholds may not be subject to the charges.

Payment processors and acquiring banks will provide merchants with detailed notification regarding their MDR liability in the coming weeks. Shopkeepers are advised to contact their respective payment service providers directly to obtain clarity on whether the new charges will apply to their operations. Understanding the implications of the MDR structure is crucial for small businesses to assess any potential impact on their profit margins and pricing strategies.

The Reserve Bank of India's decision to introduce MDR on UPI transactions aims to create a sustainable revenue model for payment service providers while maintaining digital payment accessibility. Stakeholders in the retail and small business sectors have raised concerns about the potential impact on merchant adoption of digital payment modes, particularly in rural and semi-urban markets.