Petrol Dealers Threaten Cash-Only Payments Over New UPI MDR

Starting October 15, 2026, a 0.4% Merchant Discount Rate (MDR) will be levied on specified person-to-merchant UPI transactions exceeding ₹2,000. Petrol pump dealers across India have warned they may stop accepting UPI payments above this limit and switch to cash if they must pay a flat ₹5 MDR, raising concerns about the impact on fuel retailers’ margins.

The National Payments Corporation of India (NPCI) clarified that for fuel payments under ₹2,000, the MDR will remain at 0%, ensuring that everyday commuter refuelling remains free of charges. However, for transactions above ₹2,000, a 0.4% MDR will apply from October 15. Petrol pump dealers have expressed strong opposition to this, fearing the flat ₹5 MDR on higher-value UPI payments will hurt their business.

Most individual dealers, requesting anonymity due to fear of reprisals, said, “We may have to stop accepting UPI payments of ₹2,000 and above if exemption is not allowed to fuel retailers.” This stance was conveyed by the Federation of All India Petroleum Traders, representing the concerns of fuel station operators nationwide.

Ashwani Mahajan, co-convener of the Swadeshi Jagran Manch, the economic wing of the Rashtriya Swayamsevak Sangh, also raised concerns about the government’s proposed Merchant Discount Rate. The new MDR policy has sparked debate among stakeholders about its impact on small businesses and consumers.

The government has maintained its position on the MDR, with officials rejecting calls to withdraw the 0.4% charge on UPI transactions above ₹2,000. The policy aims to regulate payment costs but has met resistance from sectors like fuel retail, which fear margin erosion.

The MDR applies specifically to person-to-merchant UPI transactions exceeding ₹2,000, while transactions below this threshold remain exempt. Petrol pump dealers argue that this distinction creates operational challenges and could push them to prefer cash payments for higher-value fuel sales.

The situation remains fluid as discussions continue between government bodies, payment platforms, and merchant representatives to address the concerns raised by fuel retailers and other affected parties.