The Steel & Hardware Chamber of Vidarbha (SHCV) has submitted a representation to the Union Finance Minister seeking withdrawal of the Merchant Discount Rate (MDR) of 0.40% (plus GST, capped at Rs.300) on UPI person-to-merchant transactions above Rs.2,000. The MDR was introduced by NPCI Circular No. 237/2026-27 dated 15.09.2026 and takes effect on 15.10.2026. A copy of the representation has been forwarded to the Prime Minister’s Office for intervention.
The Chamber points out that the RBI’s payment systems vision documents have consistently made cost reduction a core objective. UPI was promoted to trade and the public as a free, real-time payment rail. An MDR, it says, reverses the very rationale on which merchants were induced to move away from cash and cards.
Gold Rate
Sept 17,2026 - Time 10.30Hrs
The representation notes that UPI adoption has been driven, and in several respects mandated, by the Government itself. Acceptance is compulsory for businesses above Rs.50 crore turnover under Section 269SU of the Income-tax Act. Large businesses must display dynamic QR codes on invoices under the CGST Rules, and SEBI has mandated UPI for IPO applications. Members of the Chamber have also found Post Offices refusing cash and insisting on UPI for Speed Post bookings. Since this shift was induced on the footing that UPI would stay low-cost, the Chamber submits that it is inequitable to now impose a fresh cost.
The Chamber acknowledges that Section 10A of the Payment and Settlement Systems Act, which bars charges on prescribed digital payment modes, is textually confined to businesses covered by Section 269SU. It submits that the provision was part of a deliberate legislative package to remove cost barriers to digital payments. In that spirit, zero-MDR was extended in practice to merchants of every size. Small and medium traders restructured their payment systems in the legitimate expectation that this would continue.
On the structure of the charge itself, the Chamber says the Rs.300 cap works unevenly across trade of different sizes. Because MDR is capped at Rs.300 per transaction, Rs.75,000 is the break-even point (0.40% of Rs.75,000 being Rs.300). Traders transacting in the range of roughly Rs.2,000 to Rs.75,000 bear the full, uncapped 0.40% (plus applicable GST) on every transaction. These are typically small and medium traders, and include a substantial segment of the Chamber’s own membership. Beyond Rs.75,000, the effective rate declines progressively as a percentage of transaction value, since the charge stays capped at Rs.300 regardless of transaction size. The structure therefore places a disproportionately heavy burden on medium-sized trade compared with large trade.
President Sanjay K. Agrawal said: “The Gazette notification is dated 14 September. The Steering Committee met and endorsed the proposal on 15 September, and the NPCI circular was issued the very same day. A decision that ends the cost-free character of UPI for the entire trading community, for the first time since 2016, was disposed of within a day of the Gazette notification. It is fair to ask whether the Committee was given time to apply its mind or was handed a decision already settled. A decision of this consequence warranted a visibly longer and more consultative process, and we place on record our strong protest against such unilateral decisions.”
Secretary Mukul P. Agrawal said: “Our request is that the MDR be withdrawn entirely and zero-MDR restored, with the RBI and member banks funding the running and upgrading of UPI from the substantial savings they already enjoy on cash handling and currency management. In the alternative, we have asked that the MDR rate and conditions not be revised for ten years from 15 October 2026. The circular says only that the MDR will be reviewed ‘periodically’, so any future review should be preceded by genuine, time-bound consultation with trade and consumer associations.”
