The Kerala Hotel and Restaurant Association (KHRA) has announced that its members will stop accepting Unified Payments Interface (UPI) transactions exceeding ₹2,000 from October 15, 2026, in protest against a reported 0.4% merchant discount rate (MDR) on eligible transactions. The association argues that the additional payment-processing cost will increase financial pressure on hotels, restaurants and lodges already dealing with rising raw material prices and operating expenses.
The decision could change payment practices at participating hospitality establishments across Kerala, with customers potentially required to use cash for bills exceeding the specified threshold. KHRA has called for the withdrawal of the disputed charges or an increase in the transaction threshold from ₹2,000 to ₹10,000. The association’s announcement comes amid wider opposition from trade organisations in the state.
KHRA Announces Restrictions on UPI Payments Above ₹2,000
According to the association’s announcement, member establishments will restrict UPI payments exceeding ₹2,000 from October 15 as part of their protest against the reported MDR charges.
KHRA president G. Jayapal said customers would be required to make cash payments for transactions above the specified amount.
The proposed restriction concerns a payment method that has become widely used across India’s hospitality industry, including restaurants, hotels and smaller food service establishments.
UPI allows customers to make payments directly through supported digital applications, reducing the need for cash transactions and providing a convenient payment option for businesses.
For hospitality operators, digital payments have become part of routine billing processes, particularly in restaurants where customers increasingly prefer electronic transactions.
The association’s decision therefore raises questions about how participating establishments will manage customer payments if the restriction is implemented.
While the announcement specifies the ₹2,000 threshold, the extent of participation among individual establishments and the practical implementation of the restriction have not been independently established.
Association Raises Concerns Over Rising Operating Costs
KHRA has linked its opposition to the reported merchant discount rate with broader financial pressures affecting the hospitality sector.
The association argues that hotels, restaurants and lodges are already managing increases in raw material costs, making additional transaction-related expenses difficult to absorb.
Speaking about the proposed charges, G. Jayapal, President of KHRA, said:
“The industry is already suffering from the rising cost of raw materials. We feel cheated, especially since we were all encouraged to shift to digital payments and are now being charged extra for them.”
Jayapal expressed concern that the additional cost could further affect smaller establishments, where operating margins may be particularly sensitive to changes in expenditure.
For restaurant operators, profitability depends on managing several recurring costs, including food ingredients, employee expenses, utilities, rent, maintenance and payment-processing services.
Additional charges associated with customer transactions can become another expense within this operating structure.
The association’s position reflects its concern that digital payment costs could add to the financial burden on businesses already facing higher input prices.
Dispute Centres on Reported 0.4% Merchant Discount Rate
The association’s protest concerns a reported MDR of 0.4% on eligible UPI transactions.
A merchant discount rate is a charge associated with payment acceptance, typically calculated as a percentage of the transaction value.
At a rate of 0.4%, the charge would amount to ₹12 on a ₹3,000 transaction and ₹20 on a ₹5,000 transaction, assuming the rate applies to the full payment amount.
Although these amounts may appear relatively small on individual bills, businesses processing numerous transactions could face a larger cumulative expense if such charges apply regularly.
The financial impact would depend on transaction volumes, the payment instruments used and the specific charging arrangements.
An important distinction remains between the association’s reported concerns and the actual rules governing different categories of UPI transactions.
The supplied announcement does not establish which payment instruments or merchant categories are subject to the reported charge. Consequently, the existence of a universal 0.4% MDR on ordinary bank-account UPI payments should not be assumed.
KHRA Demands Withdrawal or Higher Transaction Threshold
In a joint statement, KHRA president G. Jayapal and general secretary N. Abdul Razak said UPI had become an important payment method across the hotel and restaurant industry.
The association has demanded that the disputed charges be withdrawn or that the applicable transaction threshold be increased from ₹2,000 to ₹10,000.
The demand reflects KHRA’s position that hospitality businesses should not face additional financial pressure for using payment systems they were previously encouraged to adopt.
Raising the threshold, according to the association’s proposal, would allow a larger proportion of restaurant and hotel transactions to remain outside the disputed charging arrangement.
However, the practical effect of such a change would depend on the underlying payment rules and the categories of transactions to which the charge applies.
The association’s announcement does not confirm whether its demand has been accepted or whether any change to the disputed charges is under consideration.
Trade Organisations in Kerala Join Opposition
KHRA’s announcement comes amid wider protests by trade organisations in Kerala against the reported UPI charges.
Members of trade associations in Ernakulam also staged a torch march demanding the withdrawal of the additional charges.
The demonstrations indicate that concerns about digital payment costs extend beyond the hotel and restaurant sector to other merchant groups.
For businesses that rely on frequent customer transactions, the cost of accepting payments can influence operating expenses and payment acceptance practices.
The protests also highlight the importance of clarity around digital payment charges, particularly when different payment methods and merchant categories may be subject to different arrangements.
Potential Implications for Restaurants and Customers
If participating establishments implement the announced restriction, customers making payments above ₹2,000 may need to arrange alternative payment methods.
The requirement could be particularly relevant for group dining, family restaurant bills, hotel accommodation charges and other hospitality transactions that commonly exceed the threshold.
Businesses would also need to communicate payment requirements clearly to customers to avoid confusion at the billing stage.
A shift towards cash payments could introduce additional cash-handling and reconciliation requirements for participating establishments.
At the same time, customers accustomed to making digital payments may need to adjust their payment arrangements.
The extent of any disruption will depend on how widely the restriction is adopted and whether individual establishments continue accepting other electronic payment options.
Hospitality Industry Awaits Clarity on Payment Charges
KHRA’s announcement places the cost of digital payment acceptance at the centre of a wider discussion about operating expenses in Kerala’s hospitality sector.
The association maintains that the reported charges should be withdrawn or the transaction threshold increased to ₹10,000.
Its decision to restrict UPI payments above ₹2,000 reflects concerns about additional costs at a time when restaurants and hotels are managing rising expenditure.
Further clarity on the applicable MDR rules, the response to KHRA’s demands and the extent of implementation among member establishments will determine the practical consequences for hospitality businesses and their customers.
