Indore's business community staged a widespread 'No UPI Day' protest on September 23, 2026, in response to a new 0.4% Merchant Discount Rate (MDR) scheduled to take effect on October 15, 2026. Led by the Ahilya Chamber of Commerce and Industry, over 100 trade associations, representing nearly two lakh merchants, covered their UPI payment scanners with black cloth and shifted exclusively to cash transactions.
The protest targeted the Union government and National Payments Corporation of India (NPCI)'s new framework, which will impose a 0.4% charge on person-to-merchant (P2M) UPI payments exceeding ₹2,000. Payments below this threshold will remain free. Ramesh Khandelwal, President of the Ahilya Chamber, stated that the levies threaten local commercial viability and contradict the 'Digital India' initiative.
Understanding the New UPI MDR Framework
The MDR framework, notified by NPCI following legislative amendments, aims to ensure the long-term financial sustainability of India's digital payments infrastructure. The collected fee is distributed among remitter banks, acquiring banks, UPI application providers, and payment aggregators to fund backend infrastructure, fraud prevention, and network expansion.
- Applicability: A 0.4% MDR applies strictly to Person-to-Merchant (P2M) bank-account UPI transactions over ₹2,000.
- Who Pays: The fee is borne entirely by the merchant, deducted by the acquiring bank before payout. Merchants are legally prohibited from passing this fee onto consumers.
- Cap on High Values: For transactions of ₹75,000 or more, the MDR is capped at a maximum of ₹300 per payment.
Akshay Jain, president of the Indore Retail Garments Association, highlighted that retail businesses operate on narrow margins that cannot absorb additional transaction fees. "Any increase in the cost of goods will ultimately be passed on to the customer," Jain warned.
Exemptions and Special Rates
While the new MDR introduces charges for certain transactions, several categories remain exempt or benefit from special rates:
- Person-to-Person (P2P): All money transfers between individuals remain 100% free, regardless of the amount.
- Transactions ₹2,000 & Below: Everyday retail payments under ₹2,000 incur zero MDR, accounting for approximately 96% of all merchant transactions by volume.
- Small Vendors (P2PM): 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 services like railways, telecom, utilities (water, electricity, gas), and fuel attract a flat ₹5 fee. Capital markets (securities, mutual funds, stockbrokers) will have a 0.02% fee, capped at ₹300.
Wider Resistance Across India
The resistance in Indore is part of a broader wave of merchant pushback across India. Trade bodies in Bhopal convened emergency meetings to demand a rollback, while Gwalior retail associations issued cash-only directives for transactions above ₹2,000. In Jabalpur, commercial groups launched a poster campaign to educate consumers about the impending levy and signal their intent to boycott digital payments after the October deadline.
Traders have indicated they will continue to accept UPI until October 15, 2026, but intend to strictly cap digital transactions at ₹2,000 and demand cash for higher amounts if the proposed MDR framework is not rescinded.