41% of merchants unwilling to pay UPI MDR above Rs 2,000: LocalCircles

A LocalCircles survey of 32,796 merchants found 41% would not pay MDR on UPI transactions above Rs 2,000. Among 45,000-plus UPI users, 53% said they would shift payment methods for higher-value purchases if charges were passed on.

— Source publishedMon, 31 Aug, 2026, 19:05 IST·First seen Mon, 31 Aug, 2026, 19:11 IST·Source YourStory · Capital

What happened

LocalCircles survey finds 41% of Indian merchants would not bear MDR on UPI payments above Rs 2,000. More than half of surveyed users said they would move to

Key facts

  • 41% of surveyed merchants would not pay MDR on UPI transactions above Rs 2,000
  • 9% do not accept UPI payments
  • 33% would pay MDR of 0.25% or less
  • 32,796 merchant responses
  • 53% of surveyed UPI users would shift from UPI for higher-value transactions if MDR were passed on
  • 45,000+ UPI-user responses across 322 Indian districts

Why this matters

Payments, acquiring and fintech players should prioritize monetization models beyond merchant-funded UPI MDR, as adding charges on higher-value transactions risks weakening network usage and merchant retention.

What to watch

  • NPCI, RBI or Ministry of Finance consultation language on UPI MDR, subsidy renewal or differentiated pricing.
  • Government budget allocations for UPI payment incentives and reimbursement to banks and PSPs.
  • Merchant association responses, especially among electronics, jewellery, hospitals, travel and other high-average-ticket sectors.
  • Changes in UPI transaction value mix, high-ticket transaction growth and credit-on-UPI adoption.
  • Payment aggregators introducing explicit merchant fees tied to settlement, reconciliation, credit or fraud-management services.
  • Banks, payment aggregators and fintechs intensify lobbying for UPI subsidy, interchange reform or monetization of value-added merchant services.
  • Large merchants accelerate adoption of credit-on-UPI, embedded lending, loyalty and reconciliation tools that can generate revenue without a base MDR.
  • Offline retailers maintain UPI acceptance for customer acquisition but become more selective about QR usage for high-ticket categories if any fee proposal advances.
  • Card networks and wallet providers position higher-value payment products as more predictable alternatives if UPI pricing uncertainty grows.

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