CMAI Welcomes Deferment of MDR on Select UPI Merchant Payments Until After Diwali

The apparel industry body calls for a review of the ₹2,000 transaction threshold, a wider small-merchant exemption and a graded MDR structure to protect retailers with thin margins.

The Clothing Manufacturers Association of India (CMAI) has welcomed the decision to defer the Merchant Discount Rate (MDR) on select person-to-merchant (P2M) Unified Payments Interface (UPI) transactions until after Diwali. The association said the deferment would help retailers navigate the festive trading season without disruption while urging the Government and the National Payments Corporation of India (NPCI) to review the framework’s impact on smaller merchants.

CMAI Calls for Review of MDR Framework

“CMAI welcomes the decision of the UPI and Services Steering Committee to defer the Merchant Discount Rate (MDR) on select person-to-merchant (P2M) UPI transactions until after Diwali. The deferment will help the sector get through the festive season without disruption. In the longer term, we urge the Government and NPCI to review the framework, particularly its impact on smaller retailers operating on very thin margins,” said Santosh Katariya, President Clothing Manufacturers Association of India (CMAI).

Under the framework, a 0.4% MDR applies to specified P2M UPI transactions above ₹2,000, capped at ₹300 per transaction. Transactions up to ₹2,000 and person-to-person transfers remain free. Small merchants collecting up to ₹1 lakh a month through existing QR codes continue to be covered by zero MDR.

CMAI acknowledged these safeguards and the intent behind them, while noting that the framework also marks the end of the zero-MDR regime introduced in January 2020, which helped UPI reach its present scale.

Festive Retail Operations and Payment Costs

“The festive quarter is the single most important trading window for apparel retail. UPI has become the default payment mode at the store counter, and any change in the cost of accepting it directly affects checkout practices, reconciliation and consumer experience. Introducing the charge in the middle of the season would have required retailers to reconfigure billing and accounting systems and brief store staff at the point of peak footfall. Deferment avoids this and gives the trade time to prepare. We thank NPCI and the Government for their responsiveness to the concerns raised by the retail sector,” further added Santosh Katariya, President Clothing Manufacturers Association of India (CMAI).

The association noted that the charge amounts to ₹8 on a ₹2,000 transaction and ₹40 on a ₹10,000 transaction. While these amounts may be modest in absolute terms, CMAI said they represent an additional expense for retailers already managing rent, wages and working capital costs.

According to the association, larger retailers may have greater capacity to absorb the charge or negotiate it with their acquiring partners. Smaller retailers operating just above the small-merchant exemption threshold may have less flexibility.

Retailers may also need to distinguish between transactions above and below ₹2,000 during reconciliation, adding to the administrative workload of businesses with limited back-office capacity.

CMAI Seeks Higher Threshold and Wider Exemption

CMAI said the exemption protects the large majority of UPI merchant payments by transaction count. However, apparel purchases, particularly during festive and wedding seasons, frequently exceed ₹2,000 per basket. As a result, the association said a larger share of apparel retail value could fall within the charge than the headline transaction-count figure suggests.

The association has urged the Government to consider whether the ₹2,000 threshold is set too low.

Before a new implementation date is notified, CMAI has requested the Government and NPCI to consider the following measures:

Review the ₹2,000 threshold: Assess its impact on apparel and other discretionary retail using relevant data.
Expand the small-merchant exemption: Widen the exemption beyond the existing monthly collection limit of ₹1 lakh.
Introduce a graded MDR structure: Link the charge to merchant size so that costs reflect businesses’ capacity.
Provide adequate advance notice: Allow retailers sufficient time to prepare their systems before the new implementation date.
Conduct a post-implementation review: Evaluate the impact on small retailers’ acceptance of UPI payments.

CMAI Reaffirms Support for Digital Payments

CMAI said it supports the continued growth of UPI and a financially sustainable payments ecosystem. The association’s concern, it stated, is that the transition should not discourage small retailers from accepting digital payments or place further pressure on their margins.

The association said it would engage constructively with NPCI and the Ministry of Finance and share sector-specific data and member feedback to inform the review.