Archive · 16 Sep 2026
Small Retailers Resist UPI MDR as Cash Payments Loom
India plans to charge some shops a small fee when customers pay them more than Rs 2,000 through UPI.
The shops, not the customers, would pay the fee.
The rule is scheduled to begin on October 15, near the start of the festive shopping season.
Retail groups worry that some businesses may ask customers to pay with cash instead.
Petrol stations are especially concerned because many fuel purchases are larger than Rs 2,000 and their profit margins are limited.
Trade groups want fuel payments and some essential services to be exempt.
They also want the monthly limit for fee-free merchant collections to be increased.
The government says people can still use UPI for free and without usage limits.
A 0.4% MDR will apply to UPI person-to-merchant payments above Rs 2,000 from October 15.
The fee is paid by merchants, while consumers retain free UPI use without quotas or volume limits.
Retail groups warn the charge could push small businesses and shoppers toward cash during the festive season.
Trade bodies want a higher than Rs 1 lakh monthly zero-MDR threshold and exemptions for fuel and essential payments.
The finance ministry has rejected a rollback, saying MDR applies within the merchant payment ecosystem rather than to customers.
- Who
- Small retailers, trade associations, petrol pump dealers, payment authorities, experts and the finance ministry are involved.
- What
- A 0.4% MDR is being introduced for UPI person-to-merchant transactions above Rs 2,000, prompting merchant opposition.
- When
- The MDR is scheduled to take effect on October 15, shortly before the festive season.
- Where
- India, including retail businesses and petrol stations nationwide.
- Why
- Merchant groups say the fee could reduce digital-payment use, increase costs for thin-margin businesses and weaken the formal sales trail.
Merchant and Industry Concerns
Government Response
Effect on digital payments
Merchant and Industry Concerns
Retailers and petrol dealers say the added cost could make cash more attractive and reverse some progress in digital-payment adoption, particularly during the festive season.
Government Response
The finance ministry says the MDR is part of the merchant payment ecosystem and does not charge customers using UPI.
Who should bear the cost
Merchant and Industry Concerns
The Retailers Association of India says ordinary bank-account-linked UPI payments should not be priced like credit-linked transactions and argues that the government should bear the cost.
Government Response
Officials have defended the framework and ruled out even a partial rollback.
Thresholds and exemptions
Merchant and Industry Concerns
Trade groups want the Rs 1 lakh monthly threshold increased and seek exemptions for fuel and other essential payments because of high transaction volumes and limited margins.
Government Response
The government emphasizes that individuals have unlimited free UPI usage, while the articles do not report a change to the merchant threshold or exemptions requested by trade bodies.
Economic impact
Merchant and Industry Concerns
Merchant groups say cash substitution could reduce traceable, GST-linked sales and undermine formalisation.
Government Response
Some experts say free UPI generates wider economic benefits, including lower cash-handling costs, formalisation and credit-enabling digital records.
- Standard MDR
- 0.4% on UPI person-to-merchant transactions above Rs 2,000.
- Effective date
- October 15.
- High-value cap
- The charge is capped at Rs 300 for transactions of Rs 75,000 and above.
- Category-specific fee
- Railways, telecom services, insurance and fuel are among categories described as subject to a flat Rs 5 fee above Rs 2,000.
- Zero-MDR threshold
- The existing protection applies up to Rs 1 lakh in monthly UPI collections, equivalent to Rs 12 lakh in annual digital receipts.
- Merchant requests
- Trade bodies seek a substantially higher threshold and exemptions for fuel, electricity bills, taxes, BBPS and other essential payments.
- Government position
- The finance ministry says consumers retain unlimited free UPI usage, with no monthly quotas, volume restrictions or tiered caps.
