UPI MDR: Will petrol stations stop accepting payments above ₹2,000? Nithin Kamath warns of impact on stockbrokers

New UPI Merchant Discount Rate (MDR) framework announced by Central Government and NPCI which will charge merchants a fee of 0.4% MDR for transactions above ₹5, led to pushback from industry associations, with some local merchants in several parts of the country threatening not to accept UPI payments above ₹2,000 unless the charges are waived.

Petrol pump dealers in Mumbai have warned that the above UPI payments may stop ₹2,000 from October 15 if the central government does not deduct fuel retailers from 0.4% MDR, NDTV Profit reported.

This is despite the government classifying the fuel as ‘core/low margin’, which will not attract the 0.4% MDR and will instead face stagnation ₹5 fee for any of the above transactions ₹2000.

Objections to the new charges for using UPI have been raised not only by petrol pumps, but also by other organized merchant entities.

Read also | Still Confused About UPI MDR? Find out when ₹5, 0.40% or 0.02% applies.

Fabric manufacturers, retailers, distributors of consumer goods are against this move

The Retailers Association of India said on Wednesday that the move could encourage merchants to opt for cash payments instead of UPI.

“Small traders will now think twice whether to accept cash or UPI,” RAI chief Kumar Rajagopalan said in a statement, according to Reuters.

He added that the high volume of transactions will be higher ₹2,000, especially during the upcoming festive season, and this will make cash the “path of least resistance” for retailers who operate on thin margins.

A Public Interest Litigation (PIL) was also filed in the Supreme Court seeking a stay on the new framework arguing that the same was introduced without the required statutory authority, transparency or safeguards for consumers or traders.

The Indian Garment Manufacturers Association also condemned the move, saying it could not have come at a “more challenging time”, Reuters reported.

The All India Consumer Products Distributors Federation (AICPDF) has written a letter to Prime Minister Narendra Modi in this regard, requesting that UPI be maintained with zero MDR for merchants.

“UPI is a service used by the entire economy, not by merchants themselves,” AICPDF national president Dhairyashil H Patil said, according to a Times of India report. “If there is a requirement to recover part of the cost of maintaining this huge digital infrastructure, the government should explore a broad-based mechanism rather than making the merchant the sole payer,” he added.

Read also | UPI MDR rules from October 15: What changes for fuel and other 4 key services?

In Ghaziabad, some merchants have already put up signs outside their shops saying “UPI payments will not be accepted” to protest against the new charges.

Industries such as jewelry, consumer electronics, clothing or premium retail, travel reservations, insurance, brokers, and gas stations are most exposed to transactions greater than ₹2000.

Will the new framework affect stock market transactions?

In a post on social media, Zerodha CEO Nithin Kamath warned that the new framework could challenge the economics of share trading.

Under the new rules, capital market transactions involving payments to stockbrokers, mutual funds and securities dealers will attract a trading fee of 0.02% of the total transaction value, with a maximum ₹300.

“If every UPI transfer starts ⁠ incurring additional costs, regardless of whether the customer actually transacts, I don’t see how we can absorb it indefinitely,” Kamath said.