ITANAGAR, 21 Sep: The Arunachal Chamber of Commerce and Industries (ACCI) has urged the central government to raise the threshold for merchant discount rate (MDR) on the Unified Payment Interface (UPI) from Rs 2,000 to above Rs 10,000, saying that the proposed MDR on select UPI transactions from 15 October would put an additional financial burden on small traders.

Under the proposed system, UPI payments made directly to merchants above Rs 2,000 would attract an MDR of 0.4 percent. Previously, no MDR was charged on such UPI transactions, ACCI president Tarh Nachung said.

The proposed MDR would apply to direct person-to-merchant transactions exceeding Rs 2,000.

For instance, he said, a UPI payment of Rs 2,000 to a shop would attract an MDR of Rs 8, which, as per the government clarification, would be borne by the merchant and not the customer, Nachung said.

"For transactions above Rs 75,000, the MDR would reportedly be capped at Rs 300. Thus, even if a customer makes a payment exceeding Rs 1 lakh to a merchant through UPI, the merchant would pay a maximum MDR of Rs 300," he said.

According to official estimates, Nachung said, transactions above Rs 2,000 account for around 5 percent of the total number of UPI transactions but constitute nearly 65 percent of the total transaction value.

Nachung said that cashless transactions, particularly UPI payments, have played a significant role in promoting digital payments across the country. Incentives and zero-MDR provisions for RuPay debit card and BHIM-UPI transactions were introduced to encourage digital transactions, particularly among small merchants.

Stating that small traders such as paan, vegetable, fish and roadside vendors often operate on narrow margins, and even a small charge could increase their operating costs, Nachung said that imposing MDR at the proposed 2,000 threshold could undermine the objective of encouraging small traders and consumers to adopt digital payments.

"It could also dilute the incentive of zero-cost digital transactions that drove the widespread adoption of UPI," he said, and urged the government to consider raising the MDR threshold, so that small traders and merchants are not adversely affected.