BENGALURU, Sept. 22 -- The proposed 0.4% charge on Unified Payments Interface (UPI) transactions above Rs.2,000 is set to increase costs for retailers and consumer internet companies such as Nykaa and Lenskart where spending by customers typically exceeds this threshold, analysts said.

The merchant discount rate (MDR), which will apply to specified person-to-merchant UPI transactions above Rs.2,000 from 15 October, is the first significant departure from the zero-MDR regime that has supported UPI's rapid adoption. Payments up to Rs.2,000 and person-to-person transactions will remain free, while the MDR on transactions of Rs.75,000 and above will be capped at Rs.300. The MDR charge is to be borne by merchants.

The impact on profitability...