UPI's new merchant fee: Who bears the cost?

The Reserve Bank of India has introduced a 0.4 per cent merchant discount rate on UPI transactions, ostensibly to be borne by merchants. However, analysts warn that businesses may transfer this cost to consumers through price increases.

The government has provided limited evidence on the rationale for the fee structure or assurance that merchants will absorb the cost rather than pass it on. Industry observers question whether the measure will ultimately impact consumer spending and inflation.