CAMIT urges finance minister to reconsider 0.4% MDR on UPI transactions

The Chamber of Associations of Maharashtra Industry and Trade (CAMIT) has appealed to Union Finance Minister Nirmala Sitharaman to reconsider the decision to levy a 0.4% Merchant Discount Rate (MDR) on person-to-merchant UPI transactions above Rs 2,000. The new rule is set to come into effect from October 15, 2026.

CAMIT welcomed the government's decision to keep person-to-person transactions and merchant payments up to Rs 2,000 free of charge. However, the organisation expressed concern that a recurring charge on merchants could hurt the very system that has made India a global leader in digital payments.

CAMIT president Dr Deepen Agrawal said UPI is one of India's biggest digital successes, and that merchants, from small shopkeepers to large businesses, have played a crucial role in it.

He said that in July 2026 alone, UPI recorded about 2,366 crore transactions worth nearly Rs 29.88 lakh crore, showing how large a share of the Indian economy digital payments have come to occupy.

According to Dr Agrawal, digital payments have made transactions more transparent and traceable, aiding the government's efforts at formalisation and improving tax compliance. Today even the smallest shopkeepers are accepting digital payments.

He said this has also pushed the country's GST collections to new highs. GST collection in April 2026 stood at about Rs 2.43 lakh crore, while for the full 2025-26 financial year it reached nearly Rs 22.27 lakh crore. He clarified that this growth is not due to UPI alone but a combination of rising digitalisation, GSTN, e-invoicing and formalisation.

Against this backdrop, Dr Agrawal said the decision to levy 0.4% MDR on merchant UPI transactions above Rs 2,000 needs to be reconsidered. He said Rs 2,000 cannot be considered a large commercial transaction today, since everyday purchases such as clothes, medicines, electrical goods, spare parts and consumer durables often exceed this amount.

Dr Agrawal said a merchant who accepts digital payments is already contributing to a transparent and formal economy, and this habit should be encouraged rather than burdened with a recurring additional charge. He acknowledged that the government's need for resources to maintain UPI's cyber security, infrastructure and robustness is justified, but CAMIT said this burden should not be passed on to traders and MSMEs through MDR.

CAMIT has therefore requested Finance Minister Nirmala Sitharaman to review the decision and continue the zero-MDR arrangement for UPI merchant transactions, particularly for traders and MSMEs. It said some other method could be adopted to adequately compensate banks and payment service providers.

Dr Agrawal concluded by saying digital payments should remain an incentive for formalisation, not a cost of it. He said India has succeeded in bringing crores of traders from cash to digital payments, and government policy should ensure this journey continues rather than inadvertently push people back toward cash.