Under the new rules for UPI payments, small merchants earning up to ₹1 lakh per month through QR codes will not have to pay any MDR. However, if we look at the statistics, even small shopkeepers will not be able to escape this charge.

Tea-pakoras, vegetable vendors and street vendors will not survive!

The Merchant Discount Rate (MDR) charge on UPI payments of more than Rs 2,000 will be applicable from October 15, 2026. MDR will be a charge between the shopkeeper and his bank. MDR will not be levied on merchant payments up to Rs 2,000, but a general charge of 0.4% has been fixed for payments above Rs 2,000. Now the big question is whether this charge will also be levied on small shopkeepers like tea-pakoras sellers, vegetable vendors, and street vendors? If we consider the new rules of the National Payments Corporation of India (NPCI), then even small shopkeepers will not be able to escape the UPI charge. Now understand the mathematics behind it.

First of all know the rules of UPI charges?

• The MDR for a payment of Rs 3,000 will be Rs 12.
• The MDR for payments of Rs 50,000 will be Rs 200.
• And for Rs 75,000 or more, the maximum MDR will be Rs 300.

This means that even if a payment of Rs 1 lakh is made, the MDR in this general category cannot exceed Rs 300. A provision has been made to keep street vendors and small traders out of MDR. Shopkeepers whose accounts receive transactions of up to Rs 1 lakh per month through UPI via QR will be placed in the person-to-person merchant category and will not be charged MDR. However, GST will be levied on this. In such a situation, if a trader does UPI transactions of more than Rs 1 lakh for three consecutive months, then he can be placed in the large merchant category, even if he is a street vendor.

According to NPCI, over 95% of UPI payments at shops fall under the 2,000 mark, although transactions above 2,000 are very rare. It's worth noting that NPCI or the government doesn't make individual shopkeepers' personal data public, meaning there's no data available to determine how many rupees a small shopkeeper transacts via UPI in a given month.

Now understand the real game

According to a report on UPI transactions by small businesses, small retailers such as tea shops, paan corners, handcarts, street vendors, neighborhood grocery stores, medical stores, and dairy owners have an average monthly UPI transaction volume of between 100,000 and 350,000 rupees. Medium retailers such as clothing showrooms, electronics stores, and large restaurants have transaction volumes between 500,000 and 150,000 rupees. Over 65 million small and large merchants across the country accept UPI payments via QR codes. Banks and lending platforms like BharatPe and Paytm rely on these transactions as a key basis for granting unsecured loans to small shopkeepers.

The government states that if a merchant, i.e., a shopkeeper, makes a UPI transaction of more than one lakh rupees for three consecutive months, they will be classified as a large merchant. Considering the data, MDR may also be levied on tea vendors, paan vendors, street vendors, and neighborhood grocery stores in the future, as the one lakh rupee limit is too low considering their transactions. This means that these merchants' transactions are exceeding the one lakh limit.

UPI transactions are breaking records every month

In August of this year, UPI's monthly transactions reached a record 24.51 billion, valued at 29.82 trillion rupees. This means that 24.51 billion transactions were processed through UPI in August, totaling 29.82 lakh crore rupees. These UPI figures break new records every month. It's clear that UPI usage is increasing month after month. As usage increases, so will transactions. This means that transactions by small shopkeepers will also increase. This clearly means that NPCI's 1 lakh rupee limit will prove to be dwarfed by this.