The finance ministry does not expect an increase in cash transactions due to the levy of 0.4 percent Merchant Discount Rate (MDR) for UPI transactions above Rs 2,000, which comes into effect from October 15, sources said on Thursday.
Sources said it is anticipated that the imposition of MDR would not lead to a reduction in UPI transactions as only 4 percent of total volume is getting impacted due to the decision.
Asked about the concerns leading to an increase in cash transactions post October 15, sources said it is unlikely to happen as transactions through RuPay debit cards are completely free regardless of amount.
The ministry is also preparing to put a monitoring mechanism in place to ensure that the UPI MDR burden is not passed on to customers, sources added, assuaging widespread concerns of transfer of MDR charges to end users.
The ministry has already initiated discussions with payment aggregators and other stakeholders in the Unified Payments Interface (UPI) ecosystem to sensitise them about the MDR and ensure that the burden is not passed on to consumers, sources said.
On concerns that the levy could lead to an increase in prices of goods and services, the sources said the measure is unlikely to have an inflationary impact.
The sources also said the Goods and Services Tax (GST) applicable on MDR will be largely offset through input tax credit and, therefore, its impact on the overall cost is expected to be limited. — PTI