MUMBAI, Sept. 23
Several business associations are planning a nationwide “No UPI Day” on October 2, asking merchants to stop accepting payments through the Unified Payments Interface for a day in protest against proposals to introduce a merchant discount rate on larger UPI transactions.
The campaign is being organised by trade bodies opposed to imposing MDR on UPI, a payment system that has grown rapidly under India’s zero-charge framework for merchants. The associations argue that introducing a fee would raise transaction costs for businesses and could slow the adoption of digital payments, particularly among smaller merchants.
The protest follows discussions around introducing MDR on UPI transactions above ₹2,000. According to the Business Standard report, the proposed structure could impose a charge of 0.3 per cent on transactions above that threshold, subject to a maximum of ₹6 per transaction.
The proposal has prompted opposition from merchant organisations that say even a relatively small charge could become significant for businesses processing large numbers of digital transactions.
Under the planned October 2 action, participating merchants would temporarily refuse UPI payments and encourage customers to use cash or other payment methods. The organisers intend the one-day action to demonstrate the importance UPI has acquired in everyday commerce and the potential effect of introducing transaction charges.
The campaign is being backed by several business groups, including the Federation of All India Vyapar Mandal and other merchant associations, according to the report. The organisations are seeking continuation of the existing zero-MDR regime rather than shifting part of the cost of processing UPI payments to merchants.
UPI currently operates without MDR for merchants. Unlike card transactions, where acquiring banks and payment networks can charge businesses a percentage of the transaction value, merchants generally receive the full amount paid through UPI.
That arrangement has played an important role in expanding UPI acceptance across India’s retail economy. The system is now used not only by large retailers and online businesses but also by neighbourhood shops, restaurants, street vendors and other small merchants.
The dispute centres on who should bear the cost of maintaining that payment infrastructure.
Banks, payment companies and other participants in the UPI ecosystem incur expenses in processing transactions, maintaining technology systems, preventing fraud and supporting customers. Under the existing framework, those costs cannot generally be recovered through an MDR charged to merchants.
The government has instead provided financial incentives to support parts of the digital payments ecosystem while maintaining zero MDR for UPI and RuPay debit-card transactions.
Merchant organisations argue that this approach should continue. They fear that once a transaction charge is introduced, even initially for payments above ₹2,000, the zero-cost model could gradually be weakened.
The proposed levy has particular implications for businesses where individual transactions routinely exceed ₹2,000. While a small shop selling low-value goods might see relatively few payments crossing the threshold, merchants dealing in electronics, clothing, appliances, professional services or other higher-value products could encounter the charge more frequently.
At a proposed rate of 0.3 per cent, a ₹2,000 transaction would translate into ₹6. The suggested cap of ₹6 means the absolute charge would not continue increasing with the transaction value, limiting the cost on substantially larger payments.
Supporters of an MDR mechanism have argued more broadly that India’s digital payment infrastructure requires a sustainable commercial model. Payment service providers must invest in capacity, security and technology even when consumers and merchants do not directly pay for individual UPI transactions.
The merchant groups behind the October 2 campaign take a different view. They argue that the economic benefits of widespread digital payments, including greater formalisation of transactions, justify continued government support for a zero-MDR system.
The debate has grown in importance as UPI has moved from being an alternative payment channel to a central part of India’s retail payments infrastructure.
The system processes billions of transactions each month and is used across a wide range of payment values. Its expansion has also reduced reliance on cash for many routine transactions and enabled merchants to accept digital payments without investing in conventional card terminals.
That success makes changes to its pricing structure politically and commercially sensitive.
For merchants, MDR is effectively a cost of accepting payment. Even when the charge on an individual transaction is small, businesses tend to evaluate it across thousands or millions of payments. Payment companies, meanwhile, have long argued that a viable revenue model is necessary to maintain and improve the infrastructure supporting the system.
The planned “No UPI Day” is intended to bring that disagreement into public view. Whether it produces widespread disruption will depend on how many merchants participate. The announcement by business associations does not mean all shops or companies will stop accepting UPI on October 2.
Nor has the proposed MDR structure described in the report become an established nationwide charge. The debate concerns a possible change to the existing framework, and the final form of any policy would depend on decisions by the government and relevant authorities.
For consumers, the immediate issue is therefore the planned protest rather than a change in UPI charges. Customers could encounter participating merchants declining UPI payments on October 2, although the scale of participation remains uncertain.
For India’s payments industry, the dispute raises a larger question that has accompanied UPI’s rapid expansion: whether a digital payment network operating at enormous scale can continue indefinitely without directly charging merchants, or whether some form of transaction-based revenue will eventually become part of the system.
The business associations organising the October 2 protest have made their preference clear. They want UPI to remain free for merchants and intend to use a day without it to demonstrate what they believe is at stake.
