Proposed UPI charges may push street vendors back to cash : ISB Study
Hyderabad, Nov 4 (TNT) : A study by the Indian School of Business (ISB) has found that 45 to 53 per cent of street vendors surveyed across different city tiers may reduce their acceptance of Unified Payments Interface (UPI) payments if the proposed Merchant Discount Rate (MDR) charges are introduced.
The study, conducted by the Centre for Analytical Finance (CAF) at ISB, covered 722 street vendors across 14 states and Union Territories and 64 urban local bodies. It found that while 67 per cent of the vendors accepted UPI payments, only 52 per cent were aware of the proposed MDR framework.
The framework, announced in September 2026, proposes a 0.4 per cent charge on transactions above Rs 2,000, while exempting small merchants receiving up to Rs 1 lakh a month through QR-based payments.
The National Payments Corporation of India (NPCI) postponed its implementation, initially scheduled for October 15, until after Diwali. A fresh date is yet to be notified.
UPI adoption among vendors stood at 82 per cent in Tier 1 cities, 66 per cent in Tier 2 and 64 per cent in Tier 3 cities.
Awareness of the proposed charges was 66 per cent, 55 per cent and 47 per cent respectively.
The survey found that 53 per cent of vendors in Tier 1 cities and 45 per cent each in Tier 2 and Tier 3 cities would reduce UPI acceptance if the charges were imposed.
The study also highlighted the possible impact of the proposed charges on wholesale procurement.
Nearly 70 per cent of the vendors made supplier payments exceeding Rs 2,000 at a time, potentially bringing such transactions within the proposed framework.
About 10.4 per cent of respondents said their suppliers had demanded additional charges for UPI payments in the 10 days preceding the survey.
All vendors surveyed said they would switch to cash if suppliers imposed additional charges on UPI transactions.
The findings also indicated that such costs could be passed on to consumers. Around 30.8 per cent of vendors who had already faced additional charges from suppliers said they would pass on the cost to customers, compared with 16.2 per cent of those who had not faced such demands.
The researchers cautioned that although exemptions may protect small merchants at the retail level, additional costs in wholesale procurement could put pressure on their margins and encourage a shift towards cash. This could have wider implications for financial inclusion, transaction transparency and access to formal credit for small businesses.
They recommended introducing the proposed charges through limited pilot studies and assessing their impact on supplier demands, customer prices and cash transactions before wider implementation.
They also called for an independent assessment of the actual costs of operating UPI.
The survey was conducted between September 24 and October 10, 2026, in Bihar, Chandigarh, Delhi, Himachal Pradesh, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttar Pradesh, Uttarakhand and West Bengal.
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