Srinagar, Sep 17: The Traders Association Central Lal Chowk has opposed the proposed Merchant Discount Rate (MDR) framework for specified UPI merchant transactions, warning that the additional cost could burden traders operating on thin margins and encourage some businesses to revert to cash payments.
The association held an emergency executive meeting to discuss the framework, which is scheduled to take effect from October 15, 2026.
Under the new framework announced by the National Payments Corporation of India, a 0.4 per cent MDR will apply to specified person-to-merchant UPI transactions above ₹2,000, with the charge capped at ₹300 for transactions of ₹75,000 and above.
Association president Feroz Ahmad Baba said the proposed cost could disproportionately affect small traders, micro-enterprises and local shopkeepers.
The association said businesses in Lal Chowk have increasingly adopted QR-code-based payments, making UPI an integral part of daily commerce. It argued that imposing charges on eligible higher-value transactions could increase operating costs and weaken the shift towards digital payments.
The traders warned that some merchants may discourage UPI payments for larger purchases and prefer cash if the additional costs become significant.
However, the framework does not impose MDR on every UPI transaction above ₹2,000. The Finance Ministry has said person-to-person UPI transfers will remain free, while merchant payments up to ₹2,000 and transactions covered under the zero-MDR framework for small merchants will also remain free. According to the government, around 96 per cent of P2M transactions will remain unaffected.
The Finance Ministry has also clarified that MDR is neither a tax nor a government charge and is not meant to be paid directly by consumers. The fee is distributed among participants in the digital-payment ecosystem, including banks and payment-service providers.
For Lal Chowk traders, the concern is primarily about the cumulative cost of receiving higher-value payments, particularly for retailers and wholesalers handling a large volume of such transactions.
The association has urged authorities and stakeholders in the payments ecosystem to reconsider the proposed structure and protect small and medium businesses from additional financial pressure.
With UPI deeply embedded in India's retail economy, traders say the impact of the new framework on business costs and payment preferences will become clearer after its implementation on October 15.
