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Informist, Friday, Sept. 25, 2026

 

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--Retailer group CEO:Small merchants shouldn't bear burden of UPI cost alone
--CONTEXT: Retailers Association of India CEO in interview with Informist
--Retailers group CEO: Govt may not act on our grievances related to UPI cost
--Retailers group CEO: Proposing flat UPI fee instead of percentage-linked
--Retailers group CEO: Small merchants will be forced to pass on new UPI cost
--Retailers group CEO: Prices up across categories due to war in West Asia
--Retailers group CEO: Customers feeling pinch of rising mobile phone prices
--Retailers group CEO: Expect smartphone prices to rise more in 7-10 days
--Retailers group CEO: Retailers looking beyond metros for growth

 

By Anand JC

 

MUMBAI – Small merchants, who account for close to 85% of retailers in India, should not have to bear the cost of Unified Payments Interface transactions alone, K. Rajagopalan, chief executive officer of the Retailers Association of India, told Informist. With merchants pushing back against the implementation of a new 0.4% merchant discount rate on eligible person-to-merchant transactions from Oct. 15, the retailers' association is critical about the upcoming cost burden.

 

The home-grown digital payments initiative has long been touted by the Narendra Modi government as among its more significant achievements in the last decade, but the new norm has triggered a political furore and calls for nationwide protests by traders and business associations.

 

"We understand there is a cost involved in the maintenance of UPI," Rajagopalan said. "(But) a merchant makes about 2.0-2.5% net profit if they are lucky. Why should there be a 0.4% impact on them?"

 

The association represents the spectrum of Indian retail industry, including modern chain stores, large department stores, independent retailers, e-commerce platforms, and retail service providers. It has already made a representation to the government seeking action in the matter, but Rajagopalan does not expect an immediate response. "It has now become political and people have already taken up their positions (on the issue)," he said. 

At the heart of the brouhaha is the National Payments Corp. of India's decision to introduce a 0.4% merchant discount rate on eligible merchant Unified Payments Interface transactions exceeding INR 2,000 from Oct. 15. Rajagopalan and the retailers he represents have said this may force merchants to go back to using cash, especially during the festival season when transactions exceed the INR 2,000 threshold.

Facing criticism, the authorities have moved to quell what they call misconceptions about the new charge. Finance Minister Nirmala Sitharaman said consumers will not have to pay any additional charge. The finance ministry will be holding talks with trader associations to ensure merchants do not refuse Unified Payments Interface payments, an official said Thursday. The ministry has also advised banks to monitor that the charge is not passed on to consumers.

Rajagopalan says this won't work. "Beneficiaries are everybody, but they are saying merchants are the guys who are supposed to pay for it," he said. "If they pay for it, we all know the smaller retailers, who can't bear it, will pass it on to the consumer in some form or the other."

Rajagopalan has proposed levying a flat fee of INR 5 or INR 10 instead of a percentage linked to the size of the transaction -- a feature currently available for specific, designated merchant categories such as fuel, telecommunications, utilities, insurance, and railways.

Smaller retailers, who receive up to INR 100,000 a month in total collections through their Unified Payments Interface codes, are completely exempt from the merchant discount rate.

Rajagopalan complained that the decision on the Unified Payments Interface charge was taken without consultations. "See, it is easy for banks to come together and say you have to pay (this) much. Is there any clear justification being put so that everybody can give their views?" he said.

 

PRICE PAIN

Retail inflation in India has been creeping up, and rose to 4.82% in August. It has remained higher than the Reserve Bank of India's medium-term target of 4% over the past few months, though it has remained within the broader 2-6% range. This has so far not deterred the momentum of retail sales, however. Retail sales grew to a five-month high of almost 10% on year in August, a survey by the Retailers Association of India found.

 

Retail sales during the festival season as a whole could rise 9% on year, Rajagopalan said. "September so far is going strong. We expect good news this year because between the various festivals and the marriage season, the overall festival season is quite long -- almost 100 days till right up to the end of December," he said. The festival season in 2025 was not as spread out, at around 55 days.

 

Around half the growth in festival-season sales will be led by volumes, as the festival season is longer in 2026. Pricing is also expected to be a key contributor to retailers' revenue, he said, as prices of most items have risen in the past few months. "Prices of products reliant on imports, such as plastic covers, carry bags, packaging materials, logistics have gone up. Thanks to the war situation -- we are all getting trumped," he remarked.

 

Margins are being squeezed across categories because of the steady uptick in input costs. Prices of electronic items, especially smartphones and similar products which involve a memory chip, have seen the fastest rise, Rajagopalan said. Industry watchers and smartphone assemblers have been flagging this situation for months, as increased usage of artificial intelligence is causing a paucity of chips for smartphones and similar products.

 

"The price of chips is absolutely unaffordable, smartphone prices have absolutely skyrocketed," Rajagopalan said. "Retailers don't like it at all. All of them are kind of saying this is just too much for my customers."

 

Smartphone prices are likely to increase further in the next 7-10 days, he said, creating an unfavourable situation for retailers ahead of the festival season, when consumers traditionally prefer to buy electronic products at sharp discounts. "Prices of mobile phones and other similar electronic items must be at least 30% higher now compared to the last festival season. It can possibly get worse," he said.

 

URBAN, RURAL

Corporations across sectors have acknowledged the rapid growth momentum being seen in rural areas. Indian retailers are betting their next leg of growth on tier-2 cities and beyond, even for premium offerings that have typically found favour in urban areas. "All brands that are premium are saying now that tier-2, tier-3 cities, they are seeing the same amount of aspirational capability (as in urban areas)," he said.

 

The next incremental growth opportunities are expected to come from tier-2 cities and beyond as the use of technology widens. The sharp uptick in costs in urban India is also forcing retailers and brands to look elsewhere. Retailers find the cost of operating in tier-3 and tier-4 cities to be much lower, especially now that the customer base in these areas is also increasing.

 

"If you really look at many of the retailers, they make more money if they are doing their business in tier-2, tier-3 cities (rather) than in tier-1 in many forms, because in tier-1 the costs are just dramatic," Rajagopalan said.  End

 

Edited by Rajeev Pai

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