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83% of merchants won't absorb 0.4% UPI MDR on payments above Rs 2,000 from October 15, LocalCircles survey finds
LocalCircles estimates UPI transaction value could fall by 10% and volumes by 4% after the 0.4% MDR takes effect. Its consumer survey found 76% of users expect to shift larger payments away from UPI if it carries an additional cost.
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The numbers
Figures from India Today Business & Auto,
| Share of merchant payment value above Rs 2,000: | 67% |
|---|---|
| Merchants willing to absorb 0.4% MDR or more: | 17% |
| MDR cap per transaction for Rs 75,000 and above: | Rs 300 |
Why it matters to operators and investors
With 83% of merchants unwilling to absorb the 0.4% MDR and the affected tickets above Rs 2,000 making up about 67% of payment value, decide before October 15 whether to absorb, surcharge or steer big-basket shoppers to cards or other rails, and model the margin hit on that exposed share.
What to watch next
- Any NPCI or government circular that delays, narrows or clarifies the MDR before October 15
- First monthly UPI value and volume figures after October 15 versus the survey's -10% and -4%
- Reports of surcharge notices or cash-only discounts at merchants for payments above Rs 2,000
- Card issuers or networks reporting a jump in spend on tickets above Rs 2,000
- Retailer commentary on payment costs and checkout mix in the next earnings cycle
Likely next moves
Our read of what comes next — analysis, not reported by the source.
- Merchants are likely to pass the 0.4% on to customers through surcharges, cash discounts or minimum-purchase rules, since only 17% say they would absorb it.
- Consumers are likely to move larger payments to cards or other non-UPI methods, as 76% say they expect to do.
- Card issuers and networks may market to higher-ticket shoppers above Rs 2,000, trying to win payments that leave UPI.
- The regulator or NPCI may issue clarifications or adjust the threshold before or soon after October 15 if merchant pushback grows.
- Large-ticket retailers, where payments above Rs 2,000 are most of the mix, are likely to feel the cost first and may revise checkout pricing or payment-method incentives.