Several traders in Ghaziabad, Uttar Pradesh, have started putting up notices outside their shops stating that, "UPI payments will not be accepted due to MDR charges. We accept cash payment only."
The notices are part of a protest against the new Merchant Discount Rate (MDR) framework for selected UPI merchant transactions above Rs.2,000, which is schedules to take effect from October 15. The proposed standard MDR for specified MDR for specified person-to-merchant transactions above Rs.2,000 is 0,4%. The notices were reportedly spotted in areas including Vijay Nagar, Pratap Vihar, Gaushala Fatak and Crossings Republic.
The traders are particularly concerned because many of their transactions routinely exceed Rs.2,000 and they say absorbing an additional payment cost could put pressure on already thin margins.
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The proposed MDR has become a major point of discussion among traders and shopkeepers in Ghaziabad, with many opposing the move. The traders' notices are effectively a warning to customers that UPI may not be accepted for certain higher-value purchases once the proposed charge comes into effect, NDTV reported.
Why are traders opposing UPI MDR?
The government's move to introduce a 0.4 per cent Merchant Discount Rate (MDR) on certain high-value UPI payments has sparked concerns among traders, who say the additional cost could put further pressure on already thin margins.
The Centre has said the MDR will be absorbed within the merchant payment ecosystem and should not be passed on to customers. Traders, however, remain worried about how the cost will affect their businesses.
Akshay Kumar Gupta, owner of Vaishvi Jewellers in Crossings Republic, told The Times of India that his shop had put up a notice saying it would accept only cash after October 15. He said jewellery purchases at the store generally exceed Rs 2,000 and argued that asking customers to pay in cash could inconvenience them.
Gupta also said traders operating on shrinking margins may find it difficult to absorb additional payment-related costs.
A beauty parlour owner identified as Shahnaz had also displayed a cash-only notice, The Times of India reported. She said the proposed charge could affect demand as services such as facials can cost Rs 2,000 or more, potentially prompting customers to reconsider their purchases if they have to arrange cash.
Sanjay Bindal, who runs a grocery store in Vijay Nagar, similarly raised concerns about losing customers to shops that continue accepting UPI for larger transactions, The Times of India reported.
What is the UPI MDR framework?
Under the framework clarified by the Ministry of Finance on September 15, a 0.4 per cent MDR will apply to specified merchant UPI transactions above Rs 2,000. The charge will be paid by the merchant rather than the customer and will be capped at Rs 300 for transactions of Rs 75,000 and above.
UPI payments between individuals will remain free.
Importantly, most everyday UPI transactions will not be affected. Person-to-merchant (P2M) payments of up to Rs 2,000 account for more than 95 per cent of P2M transaction volume and will continue to attract zero MDR. So, a customer paying Rs 1,500 at a shop through UPI will not face an additional charge.
The impact will primarily be on higher-value merchant payments, NDTV reported.
Why is the government introducing MDR?
The Finance Ministry has said the framework is intended to support the long-term sustainability of the UPI ecosystem and provide financial support to participants such as banks, payment service providers and UPI app providers.
The framework was introduced under the Payment and Settlement Systems Act, 2007, following deliberations by the UPI Steering Committee, the ministry said.
At the same time, the government is keen to prevent merchants from adding a separate "UPI charge" to customers' bills. Officials have begun discussions with payment aggregators and other platforms to ensure the MDR is absorbed by the merchant ecosystem.
Banks have also been advised to ensure that merchants do not pass the cost on to customers. However, the government has not publicly laid out how compliance will be monitored on a day-to-day basis, NDTV reported.
For consumers, that means the familiar UPI experience is expected to remain unchanged for most small purchases. For traders handling larger digital payments, however, the new MDR could become an additional cost to factor into their businesses.
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