Traders in Noida have threatened to shift back to cash transactions following the introduction of Merchant Discount Rate (MDR) on certain UPI payments above Rs 2,000, arguing that the additional cost could hurt small businesses and weaken the push towards digital payments. Merchant representatives have demanded that the government reconsider the new framework, warning that shopkeepers operating on narrow margins could increasingly encourage customers to pay in cash rather than absorb transaction charges.
Traders oppose levy
The objections emerged after the government introduced MDR for specified higher-value person-to-merchant UPI transactions while retaining zero charges for consumers and exempting smaller merchants covered under the zero-MDR framework. Noida traders argued that even though customers would not directly pay the charge, merchants liable for MDR would ultimately have to bear an additional operating expense every time an eligible digital transaction was processed.
Representatives of local market associations said UPI had become deeply embedded in everyday commerce because transactions were quick, convenient and largely free. They warned that introducing merchant charges could reverse that behavioural shift, particularly for businesses where profit margins were lower than the transaction costs they would now have to absorb. Traders also expressed concern that businesses could begin preferring cash for larger purchases, potentially reducing transparency in transactions.
Cash comeback warning
Shivakumar, president of a traders’ organisation in Noida, said merchants had supported the government’s digital-payment push for years but would find it difficult to accept additional costs on transactions. He warned that traders could stop accepting UPI for payments above the prescribed threshold and instead ask customers to use cash if the levy was not withdrawn.
The concerns come amid a wider debate over how India should finance the rapidly expanding UPI ecosystem. Banks, payment companies and fintech firms have argued that maintaining payment infrastructure, fraud-prevention systems, cybersecurity and merchant networks involves significant costs and that a sustainable revenue mechanism is required as transaction volumes continue to grow. BharatPe has publicly backed the new framework, arguing that it would help strengthen the payments ecosystem while protecting consumers and small merchants.
Rollback sought
Traders, however, contend that UPI’s rapid expansion has been driven precisely by its zero-cost structure and simplicity. Merchant groups fear that imposing charges, even on a limited category of transactions, could create incentives to fragment payments, discourage digital acceptance or increase cash usage.
The dispute is therefore emerging as an early test of the government’s attempt to balance two competing objectives — keeping UPI inexpensive enough to sustain mass adoption while ensuring that banks and payment-service providers have sufficient revenue to maintain and expand the infrastructure behind it. Noida traders have urged the Centre to reconsider the levy before businesses begin changing the way they accept higher-value payments.