Business EconomyPosted at: Nov 4 2026 8:59PM


ISB study warns proposed UPI charges may push street vendors back to cash

Hyderabad, Nov 4 (UNI) A study by the Indian School of Business (ISB) has found that 45 to 53 per cent of surveyed street vendors across different city tiers may reduce their acceptance of Unified Payments Interface (UPI) payments if the proposed Merchant Discount Rate (MDR) charges are implemented.
The study, conducted by ISB's Centre for Analytical Finance (CAF), 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.
Announced in September 2026, the framework 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.
According to the study titled 'UPI Utilisation and MDR Awareness Among Street Vendors', UPI adoption stood at 82 per cent among vendors in Tier 1 cities, compared with 66 per cent in Tier 2 and 64 per cent in Tier 3 cities.
Awareness of the proposed charges was also higher in Tier 1 cities at 66 per cent, compared with 55 per cent in Tier 2 and 47 per cent in Tier 3. However, a significant proportion of vendors who were aware of the proposal did not understand whether the charges would apply to them.
The study 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 introduced.
Some vendors also indicated that they might pass on the additional costs to customers, the study revealed.
The researchers pointed out that the impact could extend beyond retail transactions to vendors' wholesale procurement payments.
Nearly 70 per cent of surveyed vendors made payments exceeding Rs 2,000 at a time to suppliers, potentially bringing such transactions within the proposed framework.
About 10.4 per cent of vendors said their suppliers had demanded additional charges for UPI payments in the 10 days preceding the survey.
All respondents indicated that they would switch to cash if suppliers imposed an additional charge on UPI payments, the study stated.
Among vendors who had already faced such charges from suppliers, 30.8 per cent said they would pass on the additional cost to customers, compared with 16.2 per cent of those who had not faced such demands.
The study cautioned that even if small merchants were exempted from charges on their retail receipts, additional costs imposed by suppliers could put pressure on their margins and encourage a shift towards cash transactions. Such a trend could have implications for financial inclusion, transaction transparency and small businesses' access to formal credit.
The researchers recommended introducing any proposed charges through limited pilot studies and monitoring their impact on supplier demands, consumer prices and the use of cash before wider implementation.
They also called for an independently reviewed assessment of the actual costs of operating UPI to guide decisions on how these costs should be shared.
The survey was conducted between September 24 and October 10, 2026, covering Bihar, Chandigarh, Delhi, Himachal Pradesh, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttar Pradesh, Uttarakhand and West Bengal.
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