Kerala Hotel and Restaurant Association protests proposed merchant charges; NPCI defers implementation of 0.4% MDR framework
The Kerala Hotel and Restaurant Association (KHRA) on Tuesday, October 13, announced that its members would stop accepting Unified Payments Interface (UPI) payments above ₹2,000 from October 15, protesting the proposed merchant discount rate (MDR) on digital transactions.
KHRA said the proposed 0.4% MDR framework would increase the financial burden on small businesses, particularly hotels, restaurants and lodges. Customers making payments exceeding ₹2,000 would have to use cash at participating establishments, KHRA president G. Jayapal said, according to The Hindu.
“The industry is already suffering from the rising cost of raw materials. We feel cheated, especially since we were all encouraged to shift to digital payments and are now being charged extra for them. This will put an additional financial burden on us. The industry is already going through a difficult time due to rising prices, and this will plunge us further into a financial crisis,” said Jayapal.
Restaurant association raises concerns over additional costs
In a joint statement, KHRA president Jayapal and general secretary N. Abdul Razak said UPI payments had become widely used across the hotel and restaurant industry.
Jayapal said additional charges on digital payments would affect businesses, especially smaller establishments operating with limited margins. The association's proposed move is aimed at opposing the introduction of merchant charges on UPI transactions.
“Either the extra charges should be scrapped, or the limit should be raised to ₹10,000 from ₹2,000,” he said.
Meanwhile, members of trade organisations in Ernakulam organised a torch march across the city, demanding the withdrawal of the proposed UPI MDR charges.
NPCI defers implementation of UPI merchant charges
In relief to UPI users and merchants, the National Payments Corporation of India (NPCI) announced on Tuesday that the implementation of the proposed 0.4% MDR on transactions exceeding ₹2,000 had been deferred.
The NPCI said a revised implementation date would be decided after Diwali. The postponement delays the proposed framework, which had prompted concerns among traders about the cost of accepting digital payments.
"UPI and Services Steering Committee today decided that, keeping in mind the festive season, Merchant Discount Rate (MDR) on select Person-to-Merchant (P2M) UPI transactions shall be implemented immediately post Diwali on a date to be notified separately," NPCI said in a statement on Tuesday.
MDR to be paid by merchants, not customers
Under the proposed framework, the merchant discount rate would be payable by merchants rather than consumers. The charges are intended to apply to eligible transactions, with the proposed MDR capped at ₹300 for transactions of ₹75,000 or more.
The proposed charges have triggered opposition from sections of the trading community, which argue that additional payment costs could affect businesses and discourage the use of digital payment methods.