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Small Retailers Challenge New UPI MDR Before Festive Season
Some small shops in India are worried about a new fee on certain UPI payments.
The fee is 0.4% when a customer pays a merchant more than Rs 2,000 through UPI.
Shops, not customers, must pay this fee.
Retail groups say the fee could make cash payments more attractive, especially during the festive shopping season.
They also want the monthly limit for fee-free collections to be increased.
Petrol stations want all fuel payments to be exempt because their profit margins are limited.
Experts say free digital payments can help businesses keep records and reduce cash-handling costs.
Government officials say customers will still be able to use UPI without fees or limits and have ruled out reversing the policy.
A 0.4% merchant discount rate will apply to UPI merchant payments above Rs 2,000 from October 15.
The fee is paid by merchants, while consumers remain outside its ambit and retain free UPI usage.
Retail groups warn the charge could push small businesses and shoppers toward cash during the festive season.
Trade bodies are seeking a higher Rs 1 lakh monthly threshold and exemptions for fuel and essential payments.
The finance ministry rejected a rollback, saying the MDR does not impose charges or usage limits on customers.
- Who
- Small retailers, trade associations, petrol pump dealers, experts and the finance ministry are involved.
- What
- Businesses are opposing a 0.4% MDR on UPI person-to-merchant transactions above Rs 2,000.
- Where
- India.
- When
- The charge takes effect October 15, shortly before the festive-season shopping period.
- Why
- Merchant groups say the fee could reduce digital-payment use, squeeze businesses with limited margins and weaken the digital trail of sales.
Merchant and Industry Concerns
Government Response
Effect on digital payments
Merchant and Industry Concerns
Retail groups say attaching a fee to UPI could encourage merchants and customers to return to cash, particularly during the festive season.
Government Response
The finance ministry says MDR is part of the merchant payment ecosystem and is not a charge on customers using UPI.
Who should bear the cost
Merchant and Industry Concerns
Retailers argue bank-account-linked UPI payments should not be priced like credit-linked transactions and that the government should bear the cost of ordinary UPI payments.
Government Response
Officials have defended the existing framework and ruled out a partial rollback.
Fee-free threshold
Merchant and Industry Concerns
Trade bodies want the Rs 1 lakh monthly threshold substantially increased and seek exemptions for fuel, electricity bills, taxes, BBPS and other essential payments.
Government Response
The government emphasizes that individuals have unlimited free UPI usage, with no monthly quotas, volume restrictions or tiered caps.
Key facts
- MDR rate
- 0.4% on UPI person-to-merchant transactions above Rs 2,000.
- Effective date
- October 15.
- Maximum charge
- Capped at Rs 300 for transactions of Rs 75,000 and above.
- Current threshold
- Zero-MDR protection applies up to Rs 1 lakh in monthly UPI collections.
- Retailer concern
- Trade bodies say the threshold equals only Rs 12 lakh in annual digital receipts and does not reflect many micro-enterprises' scale.
- Fuel-sector request
- Petrol pump dealers seek exemption from both fixed and percentage-based MDR.
- Government position
- The finance ministry says customers retain unlimited free UPI usage and has ruled out even a partial rollback.
Quotes
Kumar Rajagopalan
CEO of the Retailers Association of India
“Small merchants will now think twice about whether to accept cash or UPI. During the festive season, a large share of transactions crosses the Rs 2,000 mark, and the moment a fee attaches itself to digital payment, cash becomes the path of least resistance.”
financialexpress.com
“Introducing MDR on UPI at the start of festive season could not have come at a more challenging time for the industry”
financialexpress.com
India’s finance ministry
Government ministry responsible for India’s finance policy
“MDR is a charge within the merchant payment ecosystem. It is not a charge on customers making UPI payments”
financialexpress.com
Sources
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