UPI Charges: Potential Impact on Trade in Western Maharashtra

Kolhapur | Sameer Katake

The Unified Payments Interface (UPI), which has played a major role in expanding digital payments across India, is set to undergo a significant change from October 15, 2026. Under the new framework announced by the National Payments Corporation of India (NPCI), a 0.4% Merchant Discount Rate (MDR) will apply to select Person-to-Merchant (P2M) UPI transactions above ₹2,000. For transactions of ₹75,000 and above, the MDR will be capped at ₹300 per transaction. The charge is to be borne within the merchant payment ecosystem and is not to be directly recovered from customers.

To reduce the impact on small businesses, eligible small merchants receiving up to ₹1 lakh per month through UPI QR payments will remain exempt from the MDR. Person-to-person UPI transactions and merchant payments up to ₹2,000 will also remain outside the new charge structure.

The change could have implications for the economies of Kolhapur, Sangli and Satara, where digital payments are widely used across retail, hospitality, agriculture-linked businesses, dairy, engineering, foundry, textiles, automobile and spare-parts trade, food processing and tourism.

In Kolhapur, large retail outlets, hotels, hospitals and other high-value service businesses may face additional transaction costs where eligible UPI payments form a significant part of their collections. Sangli’s agricultural and agro-processing businesses and Satara’s dairy, food-processing and small-scale industrial sectors may also experience similar cost considerations.

Although merchants have been advised not to pass the MDR directly to customers, some businesses could potentially factor additional transaction costs into their overall operating expenses. This could, in some cases, influence the pricing of goods or services. However, any such indirect price impact would depend on individual business practices, market competition and consumer demand.

A shift from digital payments towards cash could also create additional operational challenges, including cash handling, availability of change, bank deposits, accounting and security. The new framework therefore raises a broader question for businesses: how to balance the convenience of digital payments with the cost of accepting higher-value transactions.

The actual impact on consumers and businesses will become clearer after the framework comes into effect and merchant behaviour can be assessed.