Most small vendors likely to reduce UPI acceptance if MDR is implemented: Study

New Delhi, Nov 4 (IANS) About 53 per cent of vendors in Tier 1 and 45 per cent each in Tier 2 and Tier 3 have indicated they would reduce UPI acceptance if the merchant discount rate (MDR) framework comes into effect, a new study showed on Wednesday.

The study by the Indian School of Business (ISB) also showed that vendors may consider passing on additional costs to customers.

While 30 per cent of surveyed vendors in Tier 1 cities indicated that they would pass on the charge to customers, the corresponding figures were 14 per cent in Tier 2 and 19 per cent in Tier 3.

Such responses also point to the need for greater awareness of existing regulations that prohibit merchants from adding MDR charges to customer bills, said the study conducted by the Centre for Analytical Finance (CAF) at ISB.

It found that while 67 per cent of surveyed street vendors accept UPI payments, only 52 per cent had heard about the proposed MDR framework.

Announced in September 2026, the MDR framework proposes a 0.4 per cent charge on transactions above Rs 2,000, while exempting small merchants receiving up to Rs 1 lakh per month through QR-based payments.

Originally scheduled for implementation on October 15, the rollout was postponed by the National Payments Corporation of India (NPCI) on October 13 until after Diwali, with a new implementation date yet to be notified.

The survey findings show that UPI adoption varies across city tiers, with 82 per cent of vendors in Tier 1 cities accepting digital payments, compared with 66 per cent in Tier 2 and 64 per cent in Tier 3 cities.

However, awareness does not necessarily translate into an understanding of the framework's applicability, with 48 per cent of vendors in Tier 1, 46 per cent in Tier 2 and 33 per cent in Tier 3 who had heard about MDR believing that the charge would apply to them.

Nearly 70 per cent of surveyed vendors make supplier payments exceeding Rs 2,000 at a time, placing these transactions within the threshold covered by the proposed framework.

Further, 10.4 per cent of vendors reported that their suppliers had asked them to pay additional charges for UPI transactions in the 10 days preceding the survey.

--IANS

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