UPI payments above Rs. 2000 have become the centre of a dispute between Kerala’s hospitality sector and the payments authority, after the Kerala Hotel and Restaurant Association (KHRA) said its members would stop accepting such transactions from October 15, 2026. The plan was shelved after the National Payments Corporation of India (NPCI) deferred the new fee until after Diwali, but the underlying disagreement remains unresolved.
What the Merchant Discount Rate Involves
The Union government confirmed on September 15 that UPI payments to merchants above ₹2,000 would attract a merchant discount rate (MDR) from October 15. A 0.4% MDR applies to person-to-merchant transactions above that threshold, with a cap of ₹300 for payments exceeding ₹75,000. A ₹5,000 payment, for example, would potentially attract a fee of ₹20. npci defers mdr on select upi merchant transactions till after diwali keralam hotels to stop upi payments above rs 2000 +2
The fee falls on merchants rather than consumers. NPCI has clarified that UPI remains free for consumers, that person-to-person transfers carry no charge and that merchant payments of up to ₹2,000 stay outside the MDR regime. Selected categories such as railways, telecom, insurance and fuel would instead pay a flat ₹5 on payments above ₹2,000. freepressjournalinc42
Why Kerala Hotels Objected to UPI Payments Above ₹2,000
The KHRA argued that the levy would raise costs for establishments already operating on tight margins. Association president G. Jayapal and general secretary N. Abdul Razak said the charges would increase the financial burden on restaurant owners and hurt small establishments. Mr Jayapal also said members felt cheated, since they had been encouraged to adopt digital payments and were now being asked to pay extra for them. keralakaumudi
The association’s proposed remedy was specific. It wanted the extra fees scrapped or the payment limit raised to ₹10,000. Had the restriction taken effect, customers would have been required to pay in cash for bills above ₹2,000. newsbytesappthesouthfirst
Concern Among Small Businesses in Kerala
The hotel sector was not alone. The Super Market Welfare Association Kerala, which represents around 4,000 supermarkets, also announced that its members would stop accepting UPI on October 15, noting that routine grocery bills for a family often exceed ₹2,000. Protest action surfaced elsewhere too. In Tamil Nadu, a traders’ federation called a one-day UPI boycott for October 12. keralakaumudichanneliam
For small businesses in Kerala, the concern is less about a single transaction than about cumulative cost. A restaurant that regularly handles bills above the threshold would see a steady deduction from revenue that did not exist under the earlier zero-MDR arrangement.
NPCI Defers the Charge
On October 13, NPCI said its UPI and Services Steering Committee had decided, keeping the festive season in mind, to implement the MDR immediately after Diwali on a date to be notified separately. The move signals a temporary postponement rather than a withdrawal of the proposed framework. NPCI has not confirmed whether the rates or transaction limits will change. NPCI defers UPI MDR rollout until after Diwali, fintech stocks rebound +2
Officials continue to defend the principle. NPCI chief executive Dilip Asbe said a market-driven economic model is necessary to fund rising cybersecurity, scalability and infrastructure costs. Reserve Bank of India Governor Sanjay Malhotra said on October 7 that a small MDR was unlikely to significantly affect UPI transaction volumes. The government has also said that small merchants under the person-to-person merchant framework remain exempt. NPCI Defers UPI MDR Implementation Till Post Diwali +2
What Comes Next for UPI Payments Above ₹2,000
The pause gives the KHRA and other trade bodies time to press their case before the fee takes effect. Their central question is whether a flat 0.4% rate treats a small eatery and a large retailer alike when their margins differ sharply. The government’s counter is that sustaining a system used across the country requires a funding model beyond voluntary investment.
Until NPCI announces a date, merchants and customers in Kerala can continue to use UPI as before. The outcome will show whether the framework survives unchanged or is adjusted to meet the concerns raised by small operators.
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Sources
- MDR on UPI: Keralam hotels association says will stop accepting UPI payments above ₹2,000 from October 15 – thehindu.com
- UPI Merchant Charges Above Rs 2,000 To Be Implemented After Diwali – ndtv.com
Image: th-i.thgim.com
