MDR Reintroduction Sparks Debate Over Impact on Retailers and Consumers

The government's decision to reintroduce Minimum Demurrage Rate (MDR) on select UPI transactions has sparked a debate over its impact on retailers and consumers. The move aims to reduce the burden of MDR on small merchants. However, industry executives are divided on how this will affect their businesses.

Reintroduction Mdr Select Upi Transactions

The reintroduction of MDR on select UPI transactions is expected to have a significant impact on retailers, particularly those with smaller footprints. According to Kumar Rajagopalan, executive director &amp. CEO at Retailers Association of India (RAI), small merchants will now think if they should accept cash or UPI.

However, not all retailers are concerned about the reintroduction of MDR. Anjan Chatterjee, founder at Speciality Restaurants, which owns brands Oh! Calcutta and Mainland China, believes that the impact will be minimal.

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"We won’t pass on to consumers," he said.

Government Announced That Small Merchants

The government has announced that small merchants receiving up to Rs 1 lakh per month through UPI QR codes under the person-to-person-merchant (P2PM) category will continue to enjoy zero MDR on all transactions. However, several kirana stores operating out of metros and major cities across the country easily make more than Rs 1 lakh per month through UPI payments.

Dhairyashil Patil, president, All India Consumer Products Distributors Federation (AICPDF), said that close to 60% of payments made at kirana stores currently are processed through UPI. For smaller merchants, the other option could be to split payments of over Rs 2,000 into a few separate transactions to avoid payment of MDR, pushing up overall UPI volumes.

Industry executives are divided on how the reintroduction of MDR will affect their businesses. Some believe that large retailers can absorb the cost in a competitive market. Meanwhile, others think that smaller merchants may pass on at least part of the burden to customers.

Large retailers can afford to bear the cost and the overall business impact for them should not be much said an executive with a top electronics retailer. Credit cards always carried a charge. It will weigh on bottom-lines.

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The government has stated that the reintroduction of MDR is aimed at reducing the burden on small merchants and promoting digital payments.

"Largely, it is a positive move and we don’t expect any dip in volumes as such. The challenge will be enforcement as the universe of merchants and retailers in UPI is much higher than in cards," said Parijat Garg, independent fintech analyst.

The reintroduction of MDR on select UPI transactions has sparked a debate over its impact on retailers and consumers. While some believe that the move will benefit small merchants, others think that it may lead to increased costs for businesses.