Retailers push back against proposed 0.4% MDR on UPI transactions above Rs 2,000, warn of hit to thin margins

Retailers across India are vehemently opposing the proposed 0.4% merchant discount rate (MDR) on unified payments interface (UPI) transactions above ₹2,000, as represented by industry associations. In a letter to the finance ministry, the All India Mobile Retailers Association (AIMRA) highlighted that the sector is grappling with a 40% decline in business volumes year-on-year, following price hikes to cover rising memory chip costs.

AIMRA asserts that the proposed MDR would further thin already marginal net margins, often ranging between 0.75% and 1.50%, making survival increasingly difficult. With UPI transactions accounting for over 95% of P2M volumes, the 0.4% charge could directly impact the thin margins of these retailers. The resistance comes as the Centre plans to impose the MDR on transactions above ₹2,000, capped at ₹300 for payments of ₹75,000 and above.

While the Central government claims the MDR is lower than that of debit and credit card transactions, industry bodies argue that the charge disproportionately harms high-margin offline retailers, which often operate with limited overheads and low margins. The South Indian Organised Retailers Association (ORA) estimates that 20% of its ₹26,400 crore annual sales revenue comes through UPI, while the FMCG general trade industry body anticipates a direct hit on their net margins, which typically range between 1.5% and 2%.