Kerala Hotel Association Protests Proposed UPI Merchant Fees

The Kerala Hotel and Restaurant Association (KHRA) announced on Tuesday, October 13, that its members would cease accepting Unified Payments Interface (UPI) payments for transactions exceeding ₹2,000 beginning October 15. The decision comes as a direct response to a proposed 0.4% Merchant Discount Rate (MDR) framework on certain digital transactions, a move the association argues will impose an unsustainable financial burden on small businesses.KHRA president G. Jayapal highlighted the economic strain already faced by the industry, citing rising costs of raw materials and limited operational margins. According to the association, the introduction of merchant-side charges on digital payments feels contradictory to previous official encouragement to transition toward a cashless economy. Mr. Jayapal stated that the industry currently feels disadvantaged by these potential costs, warning that such measures could deepen the financial crisis for many hotels, restaurants, and lodges.In a joint statement, KHRA president G. Jayapal and general secretary N. Abdul Razak underscored that digital payments have become an essential part of day-to-day operations across the hospitality sector. They argued that the proposed charges would disproportionately impact smaller establishments. To mitigate the impact, the association has suggested either the complete withdrawal of these additional charges or, at minimum, raising the transaction threshold from ₹2,000 to ₹10,000.The resistance has reached the streets, with trade organisations in Ernakulam holding a torch march throughout the city to protest the proposed UPI merchant charges. These groups maintain that the extra costs will discourage the use of digital payment methods, ultimately affecting business volume and operations across the state. Traders have expressed strong concerns that the levy will act as a significant barrier to the continued adoption of digital finance in the retail sector.Amid the growing opposition, the National Payments Corporation of India (NPCI) issued a statement on Tuesday providing a temporary reprieve. The organization confirmed that the implementation of the 0.4% MDR on transactions above ₹2,000 has been deferred. The NPCI noted that the decision was made by the UPI and Services Steering Committee, specifically to account for the ongoing festive season. A revised date for the implementation will be notified separately following the conclusion of the Diwali festival.Under the structure proposed by the NPCI, the merchant discount rate is intended to be borne by the merchants rather than the consumers. The framework includes a cap on the MDR, which is set at ₹300 for transactions valued at ₹75,000 or higher. While this framework remains in a suspended state for the time being, the debate over who should bear the costs of digital infrastructure continues to remain a point of contention between the payments regulatory body and the merchant community.As the industry awaits further clarity, the focus remains on how the deferral will influence future negotiations between small business associations and digital payment stakeholders. For now, the postponement allows merchants and the broader trading community a brief period of normalcy throughout the busy festive window before the new cost structure is revisited.