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The anger of retailers regarding the proposed Merchant Discount Rate (MDR) on commercial merchant transactions of UPI, which has become the backbone of digital payments across the country, has now come out openly. All India Mobile Retailers Association (AIMRA) has announced a nationwide… ‘No UPI Day’ Have announced to celebrate. On this day, lakhs of mobile retailers across the country will register a symbolic protest by covering all the UPI QR Codes like PhonePe, Google Pay, Paytm and BharatPe installed at their shops with black cloth and will not accept payment through UPI from any customer throughout the day. This protest is against the new rule to be implemented from October 15, in which it has been proposed to impose 0.4 percent MDR charge on merchant transactions above Rs 2,000.
According to the association, the move is not a peaceful democratic protest against the government or Digital India, but to save the livelihood of retail traders operating on low margins.
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QR code will be covered with black cloth: On October 2, QR stands at mobile stores will be covered with black cloth to draw the attention of customers and the government to this new financial burden.
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Work will be done only through cash and card: For this one day, mobile phone vendors will take payments only through cash or traditional means, to send a message that if digital payments become expensive, merchants will be forced to go back to cash.
Under the new payments framework, commercial person-to-merchant (P2M) transactions above ₹2,000 will no longer be completely free from October 15:
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0.4% Merchant Discount Rate: Merchants will have to pay a fee of 0.4 percent on purchases above ₹2,000. For example, if a customer buys a smartphone accessory worth ₹5,000, the shopkeeper will deduct ₹20. If a phone worth ₹50,000 is purchased, MDR of ₹200 will be deducted directly from the shopkeeper’s account.
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Maximum Cap: The maximum limit of MDR on any large bill of ₹75,000 or more has been capped at ₹300.
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Small vendors protected: There will be no charge on mutual transfers (P2P) of small street vendors and grocery shopkeepers (P2PM category) and common citizens with a monthly turnover of up to ₹ 1 lakh.
The Mobile Retailers Association (AIMRA) in its memorandum sent to Finance Minister Nirmala Sitharaman has clarified that the business of mobile phone sales runs on very thin gross margins (2% to 4%).
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Direct Monthly Loss: If a typical small shopkeeper sells phone stock worth Rs 5 lakh to Rs 30 lakh a month through UPI, he will incur a net loss of Rs 2,000 to Rs 12,000 per month only in MDR charges.
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Burden of Rs 500 crore annually: The association estimates that this seemingly nominal charge of 0.4% will put an unbearable financial burden of around Rs 500 crore annually on mobile shopkeepers across the country.
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Demand for ‘Zero MDR’: There is a clear demand from retailers that if Digital India is to be promoted, UPI merchant payments should be kept within the ambit of 0% MDR as always.
Amidst this controversy, Finance Minister Nirmala Sitharaman and the banking system have made it clear that this fee is not a government tax or cess and its money will not go to the treasury of the Government of India. This is the service cost fixed for maintaining the infrastructure of the payment ecosystem (such as the acquirer bank, the customer’s bank and the UPI network provider). The government has also assured that the burden will not be passed on to the end consumers.
However, mobile retailers say that deducting money from shopkeepers’ margins is a direct hit to their profits, due to which they will register their protest through ‘No UPI Day’ on October 2.