Mobile retailers to refuse UPI payments on October 2 against proposed 0.4% MDR

Shoppers who rely on QR scanners or UPI may face trouble on October 2, 2026, Gandhi Jayanti. Mobile shopkeepers across the country have decided to observe a 'No UPI Day' that day, so many stores may not accept UPI payments for phones, gadgets, accessories or other goods. The protest is against the Centre's proposed 0.4% merchant discount rate (MDR).

For nearly six years, UPI transactions in the country have had zero MDR, meaning no charge. The government is now changing this policy. From October 15, under the new rules, merchants will have to pay an additional charge (MDR) on commercial UPI transactions above Rs 2,000. Ordinary person-to-person transactions and payments received by very small shopkeepers are excluded and will attract no charge.

The agitation is being led by the national body All India Mobile Retailers Association (AIMRA). The association has warned that if MDR is imposed on certain UPI transactions, small and medium mobile traders will face a financial crisis.

Tarvinder Singh, vice-president of AIMRA and its Delhi-NCR president, said traders will fully cover the UPI QR codes at their shops with black cloth on October 2 in protest and will not accept online payment from any customer.

Singh said: "If we truly want to make Digital India a success, the zero-MDR arrangement on UPI must continue. Our opposition is not to UPI or the digital revolution, but to this additional financial burden being imposed on the trading community. Digital India will expand rapidly only if digital payments remain affordable for the entire retail sector." Zero charges on merchants' UPI transactions is their main demand.

In an official memorandum to the finance minister, AIMRA has said small shopkeepers who handle UPI transactions of Rs 5 lakh to Rs 30 lakh a month will lose Rs 2,000 to Rs 12,000 every month directly because of this MDR. A large part of their net profit would go into this charge. By the association's initial estimate, a 0.4% MDR would place a heavy burden of Rs 40 crore a month, or about Rs 500 crore a year, on small mobile traders across the country.

Union Finance Minister Nirmala Sitharaman made a statement on the dispute on September 25. She clarified that the 0.4% MDR on certain UPI transactions above Rs 2,000 will have to be paid only by merchants, not customers. The finance minister said: "Customers need not worry at all, because we have made it clear that this burden will not be passed on to them. Unfortunately, some people have not understood the policy properly."

Relief has also been kept for small traders. Very small traders who receive up to Rs 1 lakh a month through UPI QR codes are exempt from the rule and will continue to get the benefit of zero MDR. Vegetable sellers, roadside vendors and micro-businesses will not be affected.

Will the MDR burden fall on customers? The government has assured that prices of goods or services will not rise for customers even if merchants pay MDR. According to the National Payments Corporation of India (NPCI), the cost of accepting digital payments is a normal cost of daily business. It is offset by itself through more customers coming to the shop and the removal of the risk of handling cash. NPCI has said the suggested MDR rate is much lower than for credit cards and applies only to transactions above a set limit, so shopkeepers have no reason to raise prices. Customers will buy at the printed prices fixed earlier. NPCI said banks will also coordinate with merchants to ensure this cost is not passed on to customers.

The All India Consumer Products Distributors Federation (AICPDF) has announced full support for the October 2, 2026 'No UPI Day' agitation. The body represents about 4.5 lakh distributors and 1.3 crore traders, and all its members will take part.

By AICPDF's estimate, if MDR is imposed on UPI transactions, the FMCG business and distribution chain alone will bear an additional cost of Rs 7,000 crore to Rs 9,000 crore a year. The federation has warned that distributors and retailers in this sector already work on very thin margins, so the charge would threaten their survival. It is not possible to pass this cost on to customers, so traders will suffer heavy losses, it said.