Proposed charges on high-value Unified Payments Interface (UPI) transactions have triggered protests among traders and hotel associations in Kerala and Tamil Nadu. The planned Merchant Discount Rate (MDR) of 0.4% on select person-to-merchant (P2M) transactions above ₹2,000 has raised concerns about additional operating costs for businesses, particularly small retailers, restaurants and supermarkets.
However, the National Payments Corporation of India (NPCI) announced on October 13 that the implementation of the proposed MDR would be postponed until after Diwali. The fee was originally scheduled to take effect on October 15, 2026. NPCI said the revised implementation date would be announced separately.
In Kerala, the Kerala Hotel and Restaurant Association (KHRA) had announced plans to stop accepting UPI payments above ₹2,000 from October 15 in protest against the proposed charges. Association representatives said the fee could increase the financial burden on hotels and restaurants already dealing with rising raw material costs and tight operating margins. The association also called for the charges to be scrapped or the transaction threshold to be raised to ₹10,000.
The Super Market Welfare Association Kerala also announced a protest against the proposed fee. Its representatives argued that supermarkets could be affected because routine household grocery bills often exceed ₹2,000. The association represents around 4,000 supermarkets across the State.
In Tamil Nadu, the Tamil Nadu Vanigar Sangangalin Peramaippu called for a one-day UPI boycott on October 12. The protest received a mixed response in Chennai, with several shops continuing to accept digital payments as customers preferred the convenience of UPI. Some traders reported stronger participation in selected neighbourhoods and other parts of the State.
Under the proposed framework, the 0.4% MDR would apply to eligible merchant transactions exceeding ₹2,000, while person-to-person transfers and merchant payments below the threshold would remain exempt. Small merchants with monthly UPI receipts below ₹1 lakh are also exempt under the announced provisions. The charges are intended to apply to merchants rather than consumers, and businesses are not permitted to pass the fee on to customers separately.
The postponement gives merchants and payment service providers additional time to prepare for the proposed changes during the festive shopping season. However, the concerns raised by traders reflect a wider debate over how to fund India’s digital payments infrastructure while maintaining affordable access to UPI for businesses and consumers.
The revised implementation date and any changes to the announced framework remain to be confirmed.
