Mumbai’s response to the impending UPI merchant discount rate (MDR) shows that a seemingly small payment charge could alter how consumers pay at the city’s shops, restaurants and service counters. A LocalCircles survey of more than 6,500 Mumbai consumers found that only 21% would continue using UPI for payments above ₹2,000 if a merchant passed on the charge, while 29% would switch to a credit card, 20% to cash and 17% to a debit card.
The Central government’s decision to impose a 0.4% MDR on person-to-merchant UPI transactions above ₹2,000 will take effect on October 15. The framework was notified by the Ministry of Finance on September 14 through gazette notification S.O. 5067(E), ending more than six and a half years of zero MDR on UPI payments. The charge will be capped at ₹300 for transactions of ₹75,000 and above.
The immediate question for Mumbai is not only whether merchants will absorb the cost or pass it to customers. It is also whether the city’s rapidly normalised digital payment habit can survive a visible price at the point of purchase. The LocalCircles findings suggest that consumers are willing to change payment instruments when the cost becomes explicit, particularly for higher-value transactions.
The survey found that 75% of Mumbai respondents expect to use cards, cash or bank transfers most often for purchases above ₹2,000 if UPI costs extra. Mumbai consumers showed a stronger preference for cards than respondents in the national survey. Across more than 67,000 UPI users in 291 districts, only 14% said they would continue using UPI if a merchant passed on the fee, while 27% would pay in cash and 26% would switch to a credit card.
That difference is significant because Mumbai is one of India’s largest and most financially integrated urban markets. Maharashtra accounted for 9.84% of UPI transactions by volume and 9.11% by value in April 2026, according to NPCI Statewise data cited in the report. A change in payment behaviour in the State’s commercial capital could therefore have consequences beyond individual checkout counters.
The MDR is paid to payment service providers and is intended to support the infrastructure involved in processing digital transactions. Under the new framework, however, the practical outcome for consumers will depend on how merchants respond. A retailer may choose to bear the charge, add it to the customer’s bill, encourage another payment method or absorb it selectively depending on the transaction value and operating margin.
The survey captures this uncertainty from the consumer side. While 21% of Mumbai respondents said they would continue with UPI after a merchant passed on the charge, the larger group would move to another payment mode. Cards were the most common alternative, followed by cash and debit cards. The result indicates that payment choice is not fixed; it remains sensitive to convenience, acceptance, rewards and whether the transaction attracts an additional cost.
For merchants, the issue is tied to margins and bargaining power. A national survey released on September 16 found that only 17% of merchants were willing to bear a 0.4% MDR on UPI payments above ₹2,000. In a city with a large base of small retailers and service businesses, even a limited charge can become a point of negotiation between businesses, payment companies and customers.
The Federation of Retail Traders Welfare Association, which represents around six lakh retailers in Mumbai, has called for a “No UPI Day” on October 2. Its president, Viren Shah, said that merchants were concerned that the rate could rise in the future, warning that “while it is 0.4% today, there is no guarantee that it will not become 0.75% or more”. The Maharashtra Chamber of Commerce, Industry and Agriculture, which has around 500 affiliate associations, has also backed the protest.
The protest reflects a concern about precedent as much as the immediate amount. At 0.4%, the fee is small relative to many individual purchases, but merchants are assessing the institutional direction of the policy. The question is whether a system that operated without MDR for more than six and a half years will gradually develop a broader cost structure, and who will ultimately carry it.
The government’s notification establishes the framework, but the information supplied does not establish how uniformly merchants will pass on the charge or whether payment providers will adopt standard disclosure practices. The customer experience could therefore vary across Mumbai’s retail landscape. Some businesses may display an additional fee, some may incorporate it into prices, and others may direct customers to cards, cash or bank transfers.
That variation matters in an urban economy where UPI is used across formal stores, neighbourhood retailers and service transactions. A change at the payment counter can affect not only the method of settlement but also the visibility of prices and fees. For consumers, the difference between a listed price and a final bill may become more important once a digital payment surcharge is introduced.
The institutional response remains unsettled. A delegation of trade leaders led by the Confederation of All India Traders met the Finance Minister on September 30 and was assured that its concerns would be considered. The FRTWA has nevertheless declined to withdraw its protest and said that more than 150 traders’ associations support it.
The available evidence confirms three immediate points. First, Mumbai consumers are highly likely to compare UPI with other payment modes when a fee is passed through. Second, merchants have limited willingness to absorb the charge, according to the cited national survey. Third, Maharashtra’s scale in the UPI ecosystem makes the State an important test market for how the policy is experienced in practice.
What remains uncertain is the operational detail that will determine the policy’s everyday impact: how merchants will communicate the charge, how frequently they will pass it to customers and whether consumers will permanently shift to cards, cash or bank transfers or only do so for transactions above the threshold. Those developments will become clearer after the October 15 implementation date, when the new MDR framework begins to shape actual payment decisions at Mumbai’s counters.