India Government Allows Merchant Discount Rate on UPI, Ending Free Payment Era

Government moves to amend digital‑payment rules, allowing a merchant discount rate on UPI and effectively ending the free‑payment era; the change follows Parliament’s decision and coincides with Flipkart’s launch of the SplitStore service to handle split‑bill transactions under the new fee structure.

UPI could see new charges on payments exceeding Rs 2,000, with industry estimates suggesting a 0.5 percent MDR that would shift cost from banks to merchants; analysts warn that added fees might curb the platform’s rapid retail‑payment growth, which currently handles billions of transactions daily.

Merchants ranging from small corner shops to large e‑commerce platforms voice concern that a 0.5 percent fee on high‑value sales could erode thin margins, while larger players say they may pass the charge onto shoppers through modest price hikes or minimum‑order thresholds.

Consumers may face extra fees on purchases above Rs 2,000, prompting some to revert to cash or alternative wallets; early feedback suggests the added cost could slow UPI’s push toward covering 90 percent of retail payments in the near term.