The Kerala Hotel and Restaurant Association (KHRA) has announced plans to stop accepting Unified Payments Interface (UPI) payments above Rs 2,000 from October 15, protesting against a proposed merchant discount rate (MDR) on certain digital transactions.
The association said the additional charges could increase operating costs for hotels, restaurants and smaller food establishments already dealing with rising prices of raw materials and other expenses. Under the proposed arrangement, eligible merchant transactions above Rs 2,000 would attract a 0.4% fee.
However, in a subsequent development on October 14, the planned rollout of the UPI merchant fee was deferred until after Diwali. The delay means the proposed charges will not begin on October 15 as originally scheduled.
Why Are Kerala Hotels Opposing UPI Charges?
KHRA president G. Jayapal said the hospitality industry was concerned about the financial impact of introducing charges on digital payments.
Hotels and restaurants increasingly rely on UPI because customers use it for everything from small food purchases to larger family bills. The association argues that introducing transaction fees could place an additional burden on businesses operating with limited profit margins.
The industry is also concerned about the change in payment policy after businesses and consumers were encouraged to adopt digital transactions over recent years.
The association has demanded that the additional charges be scrapped or that the transaction threshold be increased from Rs 2,000 to Rs 10,000.
How Much Is the Proposed UPI Merchant Fee?
Under the proposed framework, eligible person-to-merchant UPI transactions exceeding Rs 2,000 would attract a merchant discount rate of 0.4%, subject to applicable conditions and limits.
The charge is intended for eligible merchant transactions and does not mean that every UPI payment will attract a fee. Ordinary person-to-person transfers and transactions covered by exemptions are treated differently.
For restaurants, the concern is that the cost of processing larger digital payments could add up across hundreds or thousands of transactions.
Businesses are also worried that absorbing the fee could reduce their margins, while passing it on to customers could make digital payments less attractive.
Will Customers Have to Pay Cash Above Rs 2,000?
Under the association’s announced protest plan, member establishments intended to stop accepting UPI payments above Rs 2,000 from October 15. Customers could therefore have been asked to use cash or another accepted payment method for larger bills.
However, the postponement of the MDR rollout changes the immediate situation. The proposed charges will now be implemented after Diwali, with the revised schedule and applicable details to be clarified.
The association’s announcement reflects its protest position, and customers should check payment options directly with individual establishments.
Wider Impact on India’s Digital Payments
The dispute highlights the challenges involved in changing the cost structure of a payment system widely used by consumers and businesses.
UPI has become a routine payment option for restaurants, retailers, supermarkets and small businesses. Merchant groups fear that additional transaction costs could encourage some establishments to limit digital payments or return to cash for larger purchases.
The postponement provides more time for businesses and payment providers to prepare, but questions remain about how the proposed charges will affect merchants once they are introduced.
Summary
The Kerala Hotel and Restaurant Association announced plans to stop accepting UPI payments above Rs 2,000 from October 15 to protest a proposed 0.4% merchant fee on eligible transactions. The association says the charges could hurt small businesses and has demanded that the threshold be raised to Rs 10,000 or the fees scrapped. The rollout was subsequently postponed until after Diwali, delaying the immediate impact on merchants and customers.
