India’s brick-and-mortar mobile phone retailers are facing a twin-track crisis that threatens to wipe out thousands of small businesses before the end of the year.

Already reeling under a dramatic escalation in smartphone prices driven by global component shortages, offline retailers have now mounted an urgent defense against proposed Merchant Discount Rates (MDR) on Unified Payments Interface (UPI) transactions.

In a formal representation submitted to Union Finance Minister Nirmala Sitharaman on September 16, the All India Mobile Retailers Association (AIMRA)—representing over 1.50 lakh small mobile phone and consumer electronics retailers nationwide—warned that levying a 0.40 per cent MDR on digital payments will lead to widespread store closures post-Diwali. 

The core of the retail sector’s panic lies in the stark mismatch between baseline profit margins and digital transaction costs. “

Mainline mobile retailers operate on extremely thin net margins (often between 0.75 per cent and 1.50 per cent). If an MDR charge of 0.40 per cent is imposed on UPI transactions—which account for a significant portion of digital payments—it will directly erode their survival margins:

For a small retailer processing ₹10 lakh to ₹40 lakh monthly via UPI, an MDR of 0.40 per cent translates to a direct net loss of ₹4,000 to ₹16,000 every month.

At a time when businesses are fighting for survival, absorbing these additional fees is virtually impossible,” stated Kailash Lakhyani, founder chairman, AIMRA in the letter to the Union finance minister.

The All India Mobile Retailers Association (AIMRA) has presented a four-point charter of demands urging the Union Finance Ministry to exempt small and medium electronics merchants from proposed Merchant Discount Rates (MDR) on UPI transactions.

AIMRA calls for complete zero-fee protection on digital payments to prevent thin-margin storefronts—operating on sub-1.5 per cent net profit margins—from suffering severe income erosion.

They stress that maintaining free digital infrastructure is essential to stop micro-retailers from reverting to cash payments amid a broader industry crisis marked by a 70 per cent spike in device prices and a 40 per cent drop in footfall.

Furthermore, the association requests formal consultations before any payment fee revisions are enacted, along with targeted policy relief to help offline businesses absorb global supply chain inflationary pressures. 

AIMRA pointed out that the mobile phone retail industry in India is already experiencing an “unprecedented downturn” due to surge in smartphone prices that have led to a 40 percent decline in overall business volume compared to 2025.

“Operating under intense competition and rising operational expenses (rent, staff, electricity), many small retailers are on the brink of collapse. We fear that without immediate support, a significant number of small mobile retailers will be forced to shut down permanently post-Diwali,” Lakhyani added.

Published on September 17, 2026