Why is UPI merchant discount rate trending in India?
The Reserve Bank of India is introducing a 0.4% merchant discount rate (MDR) on UPI transactions exceeding ₹2,000, which will take effect after Diwali. Hotel and restaurant groups in Kerala say the charge will hurt small businesses, so they plan to refuse such digital payments from mid‑October.
What happened
- 13 Oct, 2026
Kerala Hotel and Restaurant Association announced it will stop accepting UPI payments above ₹2,000 from 15 Oct due to the new 0.4% MDR [2]
- Earlier
The MDR on UPI transactions over ₹2,000 has been deferred and is set to begin after Diwali [1]
What you need to know
The MDR applies only to UPI payments above ₹2,000.
The rate is 0.4% of the transaction value.
Businesses can choose to limit digital payments or revert to cash for larger bills.
The policy is part of a broader effort to regulate digital payment fees.
Exact date when the deferred MDR will be enforced after Diwali has not been confirmed, and whether the government will adjust the ₹2,000 threshold.
Background
The Reserve Bank of India plans to levy a merchant discount rate of 0.4% on UPI transactions that exceed ₹2,000. This move aims to create a revenue stream from digital payments but has been postponed until after the Diwali festival.
Hotel and restaurant operators in Kerala, represented by the Kerala Hotel and Restaurant Association (KHRA), argue that the additional charge will increase operating costs for small establishments already facing high raw‑material prices. They have announced a temporary halt to accepting UPI for bills above ₹2,000, urging either a removal of the charge or a higher transaction limit.
Questions people ask
What is the merchant discount rate (MDR) for UPI?
It is a 0.4% fee on each UPI transaction that exceeds ₹2,000.
When will the new MDR be applied?
The fee is scheduled to start after Diwali, following a recent deferral.
How are businesses responding to the MDR?
Some, like Kerala hotels, plan to stop accepting UPI for amounts above ₹2,000 and request a higher limit or removal of the charge.
Where this came from
[1] timesofindia.indiatimes.com
MDR on UPI transactions over Rs 2,000 deferred; to come into effect post Diwali
Preview image from timesofindia.indiatimes.com
[2] thehindu.com
MDR on UPI: Keralam hotels association says will stop accepting UPI payments above ₹2,000 from October 15
Preview image from thehindu.com
Found through Google Trends and drafted with AI from at least two cited sources. Published automatically after passing our automated checks for sources, wording and safety. It may not have been reviewed by a person yet. Report a correction.