UPI Charges Above ₹2,000: Mumbai Traders React Strongly To MDR & Fear Shift To Cash, Say Customers May Bear Burden

Mumbai: The proposed introduction of a 0.4 per cent Merchant Discount Rate (MDR) on eligible UPI payments above Rs 2,000 has triggered concern among traders and small business owners in Mumbai, with several vendors at Dadar market saying they may have to limit digital payments or return to cash transactions.

The new MDR framework is scheduled to come into effect from October 15, 2026. The 0.4 per cent charge will apply to eligible person-to-merchant (P2M) UPI transactions above Rs 2,000, while consumers will continue to make UPI payments without a transaction fee.

Visit asg-reflektory.pl for more information.

Customers Raise Concerns Over Charges

Speaking to the Free Press Journal in Dadar market, several shopkeepers and customers expressed their disappointment over the charges. A woman customer said, "We already pay GST, Income Tax and now the government has introduced a new one. The shopkeepers will raise product prices now. Where will the common public go? The government should understand."

A shopkeeper said the biggest concern was how the additional merchant-side cost would affect their already rising operating expenses. “Rents are increasing, staff costs are increasing and all our expenses are going up. Petrol and diesel prices are also high. Where will an ordinary shopkeeper get the money from?” one businessman said.

He added, “We will have to make some adjustment somewhere. The government is not providing any special facility for middle-class people or shop owners. We are only paying taxes, and we are not getting anything in return.”

Traders Consider Limiting UPI Payments

Another clothing trader said businesses in his community were already discussing ways to deal with the new charge. “People in our clothing community said that if they are charging this above Rs 2,000, we can accept GPay up to Rs 2,000 and take cash from the customer for anything above that,” he said.

The trader said another option would be to incorporate the additional cost into the final price. “We have to find some solution. Are we going to pay all of this from our own pockets?” he asked. However, another vendor pointed out that shifting back to cash may not be easy because customers have become heavily dependent on UPI.

“No one gives cash anymore. Everyone uses UPI. Even if you ask someone for Rs 10, they don't give cash. Whether it is Rs 10, Rs 20 or Rs 25, they make the payment through UPI,” the vendor said.

Another shopkeeper said his business could be particularly affected because many of the products sold at his store cost more than Rs 2,000. “If a customer comes to buy something above Rs 2,000, we cannot take the money from their pocket in cash every time. So we may have to limit UPI. We have no other option,” he said.

Some traders also fear that the merchant-side cost could eventually influence the prices customers pay. One vendor said, “If the government deducts the amount from us, we will have to recover it from the customer by increasing the price. That is the straightforward issue.”

Indore Traders To Observe 'No UPI Payment Day' On September 23 Over 0.4% MDR Charges

Another businessman said the change could push some merchants towards cash payments for higher-value purchases. “Today, ATMs are not always available and people don't carry cash. But if charges are imposed, a small merchant or hotel owner may simply say, ‘Take cash for anything above Rs 2,000.’ They may stop doing those transactions through UPI,” he said.

He also criticised the move, saying, “When people were being encouraged to make online payments and go cashless, everyone adopted UPI. Now, if charges are imposed on those transactions, people will naturally be worried.”

A vendor said the situation could become more difficult for businesses already dealing with inflation and rising costs. “Already there is inflation and business is not running properly. Everything in the market is unstable. How are we supposed to manage if another cost is added?” he said.

UPI Remains Dominant Among Customers

Another trader said UPI had become so dominant that completely abandoning it would also create difficulties. “Earlier, everything was done in cash. Now almost 90 per cent of customers come with Google Pay or another UPI payment. Nobody carries cash anymore,” he said.

Some vendors said they would wait until the new system comes into effect before deciding how to respond. “We don't know what will happen on the ground yet. After October 15, we will understand how it actually works,” one shopkeeper said.

The proposed MDR is a merchant-side charge rather than a direct tax on customers. Under the framework, UPI payments by consumers remain free, while eligible P2M transactions above Rs 2,000 attract the MDR. The charge is capped at Rs 300 for transactions of Rs 75,000 and above. For Mumbai's traders, however, the immediate concern is whether the new cost will force businesses to adjust prices, restrict UPI payments or encourage customers to carry cash again.

Read full story at source