The Indian government ordered merchants to absorb the 0.4 % UPI Merchant Discount Rate (MDR) instead of passing it on to shoppers, keeping bill totals unchanged for consumers.

Why the rule matters

Opposition groups pressed the government to eliminate the fee altogether. After a “careful study,” officials settled on a compromise: the fee stays, but merchants must shoulder it, and regulators will watch for any slip-through.

Background on the fee

The MDR is a small charge levied on merchants for each UPI transaction.

Who wins, who bears the burden

  • Consumers: Bills now reflect the listed price, with no hidden UPI surcharge.
  • Merchants: They absorb the 0.4 % fee.
  • Payment aggregators: Officials consulted them to plug gaps that allowed fee pass-throughs, putting pressure on them to tighten enforcement.

What the government will do

  • Monitoring: Authorities will track merchant billing practices to ensure compliance.
  • Engagement with aggregators: Officials have spoken with the platforms that process UPI payments to tighten oversight.

What to watch next

Takeaway: By barring UPI fee pass-throughs, the government protects the headline price a shopper sees.