'No UPI Day': Indore traders reject payments over proposed 0.4% MDR fee, switch back to cash

In a direct challenge to the proposed imposition of a 0.4% Merchant Discount Rate on digital payments, over 100 trade associations across Indore covered their payment scanners with black cloth and switched exclusively to cash transactions on September 23.

Led by the Ahilya Chamber of Commerce and Industry, the apex representative body for more than 125 local trade groups, the symbolic 'No UPI Day' protest saw nearly two lakh merchants shut off digital payment options. According to reports, the protest took place across key markets, including Sarafa, Marothia, the Siyaganj grocery hub, and the local cloth and plywood markets.

Posters were pasted across shop fronts while social media and dedicated call centres mobilized a campaign targeting over ten lakh consumers.

The widespread boycott follows an announcement outlining a new payment framework scheduled to take effect on October 15, 2026, under which person-to-merchant UPI payments exceeding ₹2,000 will attract a 0.4% charge, while payments below ₹2,000 will remain free.

Ramesh Khandelwal, President of the Ahilya Chamber of Commerce and Industry, said that the levies threaten local commercial viability and run counter to national economic goals. "This will become a major hurdle in the Digital India push. Traders have unanimously decided to strongly oppose the MDR," Khandelwal said.

Traders warned that while they will continue to accept UPI until October 15, 2026, they intend to strictly cap digital transactions at ₹2,000 and demand cash for higher amounts if the proposed MDR framework is not rescinded.

Akshay Jain, president of the Indore Retail Garments Association and joint secretary of the Ahilya Chamber, emphasised that retail businesses operate on narrow margins that cannot absorb transaction fees. "A merchant does not create money. A merchant sells goods, and any increase in the cost of goods will ultimately be passed on to the customer," Jain said.

The immediate resistance in Indore forms part of a swift wave of merchant pushback across India following the MDR announcement:

• Bhopal trade bodies convene joint action (September 23): Aligning with the Indore protests, the Bhopal Chamber of Commerce and Industries convened emergency meetings to submit formal memorandums to state and central authorities demanding an immediate rollback of the proposed 0.4% fee on transactions exceeding ₹2,000.  
• Gwalior Retail Associations issue cash-only directives (September 22): The retail merchant federations across Gwalior resolved to restrict digital payment displays, encouraging buyers to settle transactions above ₹2,000 in cash to avoid future fee liabilities.  
• Jabalpur wholesale markets launch poster campaign (September 20): Commercial trade groups in Jabalpur began affixing notices across wholesale mandis to educate consumers about the impending 0.4% levy and signal intent to boycott digital payments after the October deadline.

What is the MDR fee announcement

The MDR (Merchant Discount Rate) fee announcement refers to a framework notified by the National Payments Corporation of India (NPCI) on September 15, 2026 (following legislative amendments under the Payment and Settlement Systems Act in mid-September).

It introduces a processing fee on select UPI digital payments starting October 15, 2026, ending the mandatory zero-charge framework that had been in place for bank-account UPI since 2020.

Core mechanics of the MDR framework

• Rate Structure: A 0.4% MDR applies strictly to Person-to-Merchant (P2M) bank-account UPI transactions exceeding ₹2,000.
• Cap on High Values: For transactions of ₹75,000 or more, the MDR is capped at a maximum of ₹300 per payment.
• Who Pays: The fee is borne entirely by the merchant (deducted by the acquiring bank before payout). Payment apps and merchants are legally prohibited from passing this fee onto consumers or charging convenience surcharges.

Exemptions & Special rate bands

1. Person-to-Person (P2P): All money transfers between individuals remain 100% free, regardless of amount.
2. Transactions ₹2,000 & Below: Everyday retail payments under ₹2,000 incur zero MDR (accounting for roughly 96% of all merchant transactions by volume).
3. Small Vendors (P2PM): Small micro-merchants receiving up to ₹1 lakh per month in UPI receipts are completely exempt, even on individual payments exceeding ₹2,000.

Concessional Sectors

Essential and fixed-fee services attract special lower rates instead of 0.4%:

• Flat ₹5 fee: Railways, telecom, utilities (water, electricity, gas), and fuel.
• 0.02% fee (capped at ₹300): Capital markets (securities, mutual funds, stockbrokers).

Why was MDR introduced?

The Union government and NPCI introduced the fee to ensure the long-term financial sustainability of India's digital payments infrastructure. The collected MDR is distributed across remitter banks, acquiring banks, UPI application providers, and payment aggregators to fund backend server infrastructure, fraud prevention, and network expansion.