Merchants wary of margin squeeze as Centre announces UPI fee | Hyderabad News

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.“This will directly impact our margins as every transaction is above ₹2,000 in my shop,” said R Murtaza, a furniture merchant. He added, “If I sell furniture worth ₹10,000 a day, I’ll be indirectly paying approximately ₹15,000 a year, which is not a small amount considering the already low profit margins.”Health and fitness shop owner Thrishul Kumar said the move could put further pressure on physical stores. “With footfall already low due to the impact of online shopping on stores, shop owners will be forced to avoid UPI in the first place, which will give more way to cash transactions. That would then be the opposite of the digital infrastructure the nation is trying to build,” he said. “The whole world is moving towards UPI payments; India would be going back to traditional means of money exchange,” Thrishul said.Similar concerns were raised by the owner of a tours and travel agency, who said the impact could be significant for businesses operating on thin margins. “In sectors like tourism, the profit margins are hardly about ₹500 to ₹600, regardless of how expensive air tickets cost, and the business sustains on the quality of service,” said Parvinder Singh Khanuja, owner of Triptonic. “The merchant would not be able to accept large payments in cash, and if UPI transactions come at the cost of the profits, it would be a deadlock situation for the sellers,” he 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. “Clarity is still awaited, but hopefully, the buyer shouldn’t be in a position to pay the extra amount. 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.Communications minister Jyotiraditya Scindia has clarified that merchants cannot pass the MDR on to customers. “Under the rules that have been introduced, no merchant can pass this charge on to any customer. If they do so, it will be outside the legal framework,” he said.“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.Chartered accountant Prasad Rathi said he did not expect a significant impact on stock market transactions. “It’s only 0.02%, so on a ₹1-lakh margin top-up, you are looking at about ₹20. That is not a very significant amount, and brokers are likely to absorb it. SIPs through UPI AutoPay will continue to remain free, so retail investors don’t really have anything to worry about,” he said.