Mobile phone retailers across India plan to observe October 2 as a “No UPI Day”, protesting the proposed 0.4% Merchant Discount Rate (MDR) on specified UPI merchant transactions above Rs 2,000.The protest has been called by the All India Mobile Retailers Association (AIMRA), which said retailers will symbolically cover their UPI QR codes with black cloth and refrain from accepting UPI payments on Gandhi Jayanti.AIMRA vice president and Delhi NCR president Tarvinder Singh said the move was aimed at highlighting concerns over the additional cost that the MDR could impose on mobile retailers.“The All India Mobile Retailers Association (AIMRA) has called for a ‘NO UPI DAY’ on October 2, 2026, to highlight the concerns of mobile retailers regarding the 0.4 per cent Merchant Discount Rate (MDR) applicable to eligible merchant UPI transactions,” Singh said in a statement.
Retailers flag impact on margins
According to a representation submitted by AIMRA to finance minister Nirmala Sitharaman, the 0.4% MDR could result in a monthly net loss of between Rs 2,000 and Rs 12,000 for a small retailer processing Rs 5 lakh to Rs 30 lakh through UPI each month.The retailers’ body estimates that the charge could impose a burden of around Rs 40 crore a month and nearly Rs 500 crore a year on small mobile retailers across India.Singh said the association’s protest was not against UPI or digital payments but against the additional cost for merchants.“If we want Digital India, UPI must remain zero MDR. This is not a protest against UPI or Digital India. Our concern is the additional financial burden being placed on merchants who accept digital payments,” he said.“Our clear demand is that UPI merchant payments should continue under a Zero MDR structure,” Singh added.
0.4% MDR to apply from October 15
The government has introduced a 0.4% MDR on UPI transfers above Rs 2,000 made to merchants from October 15. Person-to-person transactions and small payments will remain outside the charge framework.The MDR will be capped at Rs 300 for transactions of Rs 75,000 and above. Essential and thin-margin sectors, including railways, telecom, insurance, fuel and agricultural inputs, will face a flat MDR of Rs 5 per transaction above Rs 2,000.Payments involving mutual funds, securities and stockbrokers and dealers will attract an MDR of 0.02%, also capped at Rs 300.Person-to-person UPI transactions, which account for 37% of transaction volume and 70% of transaction value, will continue to attract zero charges irrespective of the transaction size.The move ends nearly six years of fully free UPI payments for the specified merchant transactions.
Government says consumers will not bear MDR
The Centre has said the MDR is not a government charge and that consumers will not be required to pay it.Sitharaman said the charge would be borne by traders, merchants, banks and other participants in the payment ecosystem rather than consumers. She also said the money collected through MDR would not go to the government.“The MDR is being charged by NPCI, the aggregator, the service provider, those who provide the POS machines and the merchant bank. They are the ones providing the service for transactions above Rs 2,000. The merchant is the one who is going to pay. That money is not coming to the Government of India and we are not imposing it,” Sitharaman said.She also said the MDR would not be passed on to customers.The Indian Banks’ Association is expected to put in place a mechanism to ensure that merchants do not recover the charge from consumers, while the finance ministry is also expected to hold discussions with merchants and the Confederation of All India Traders on concerns related to the new framework.
Supreme Court to hear challenge
The new MDR framework is also facing a legal challenge. The Supreme Court is scheduled to hear a plea challenging the Centre’s decision to impose the charge on specified UPI person-to-merchant transactions above Rs 2,000.The petition has challenged the September 14 notification and the MDR framework announced on September 15, which is scheduled to take effect from October 15.The plea alleges that the levy was introduced without adequate statutory safeguards, transparency or public consultation and has questioned the distinction between UPI transactions and RuPay debit card payments.It has sought the quashing or suspension of the MDR framework insofar as it imposes a charge on UPI transactions above Rs 2,000. Alternatively, it has sought reconsideration after consultation, publication of empirical data and an impact assessment, along with safeguards for micro and small enterprises.The Centre’s new framework and the proposed charges have therefore prompted concerns among sections of the merchant community even as the government maintains that the MDR will not be passed on to consumers.
