The All India Mobile Retailers Association (AIMRA) has written to Finance Minister Nirmala Sitharaman, urging the government to exempt small and medium mobile phone retailers from any proposed Merchant Discount Rate (MDR) or transaction charges on UPI payments. The association, which claims to represent more than 1.50 lakh small mobile phone and electronics retailers across India, argues that the sector is already under severe margin pressure and cannot absorb additional payment costs.

What AIMRA Is Asking For

In its letter to the Finance Ministry, AIMRA has demanded a complete exemption from UPI MDR for small and medium retailers, continued access to low-cost digital payments, and formal consultation with trade bodies before any fee structure is finalised. The association has also called for broader policy support for the retail sector.

The demands come as policymakers reportedly weigh the introduction of a 0.4 per cent MDR on UPI transactions — a move that would reverse the zero-MDR regime that has been in place since January 2020, when the government scrapped charges to accelerate digital payment adoption.

The Margin Math

AIMRA's letter lays out a stark financial case. According to the association, mainline mobile retailers operate on net margins of just 0.75 per cent to 1.5 per cent. A 0.4 per cent MDR on UPI transactions — which it says account for a significant share of digital payments in this segment — would directly eat into those already-thin margins.

The letter estimates that a retailer processing between ₹10 lakh and ₹40 lakh in monthly UPI transactions would face an added monthly cost of ₹4,000 to ₹16,000 if the proposed charge takes effect. For smaller stores, that could represent a meaningful portion of net profit.

Rising Handset Prices Add to the Strain

The association also flagged a separate but compounding challenge: a sharp rise in smartphone prices driven by higher component and memory costs since November 2025. AIMRA claims that entry-level smartphones, which retailed at around ₹10,000 in 2025, are now selling for approximately ₹17,000 and could climb further to ₹20,000 by December 2026.

The price surge, the association argues, has already suppressed consumer demand and contributed to a significant decline in business volumes for smaller retailers. Layering MDR charges on top of that, it warns, could accelerate store closures in the unorganised segment.

Broader Context and What Comes Next

The debate over UPI charges is not new. The Reserve Bank of India (RBI) and industry stakeholders have periodically revisited the economics of zero-MDR, with payment aggregators and banks arguing that the current model is financially unsustainable. The government, however, has consistently prioritised digital payment adoption, particularly in smaller towns and rural markets.

This is the Nth time small-trade associations have formally petitioned against MDR reintroduction, reflecting persistent anxiety in the retail sector about the cost implications of policy shifts. AIMRA's intervention follows similar representations by sectors including kirana stores and petrol dealers in recent years.

No formal response from the Finance Ministry has been reported as yet. The outcome of consultations, if any are convened, will be closely watched by India's estimated 1.50 lakh-plus mobile retail outlets and the broader small-merchant ecosystem that has come to depend on UPI as a near-zero-cost payment rail.