Centre to monitor UPI MDR rollout daily from 15 October
A 0.4% MDR will apply to specified merchant UPI payments above ₹2,000, with the government monitoring implementation daily to ensure charges are borne by merchants rather than consumers.
What happened
The Centre will monitor new UPI MDR implementation daily from 15 October to ensure merchants, not consumers, bear charges. The 0.4% levy applies to select P2M
Key facts
- 0.4% MDR on specified P2M UPI transactions above ₹2,000 from 15 October
- MDR capped at ₹300 for transactions of ₹75,000 and above
- P2M transactions up to ₹2,000 remain zero MDR
- Small P2PM merchants receiving up to ₹1 lakh monthly through UPI QR remain exempt
- Essential sectors face flat ₹5 MDR above ₹2,000
- Capital-market transactions face 0.02% MDR, capped at ₹300
- 18% GST applies to MDR fees, not underlying transaction value
- UPI processed 241.6 billion transactions worth ₹314.2 trillion in FY26
- UPI had more than 55 crore users as of August 2026
Why this matters
Assess payment-stack partnerships and merchant-acquiring capabilities that can reduce MDR exposure or monetize compliance, particularly among enterprise merchants with high volumes of UPI transactions above ₹2,000.
What to watch
- Formal notification defining covered merchant categories, transaction types, effective date and exclusions.
- Clarification on whether MDR applies per transaction, per order, split payments or aggregator-routed transactions.
- Acquirer and payment-aggregator fee circulars, revised merchant agreements and settlement-file changes.
- Government daily-monitoring disclosures, consumer-surcharge complaints, enforcement notices or public naming of non-compliant merchants.
- Large retailer, marketplace, food-delivery and payment-company reactions, including litigation or requests for exemption.
- Changes in UPI transaction distribution around the ₹2,000 threshold, including payment splitting or shifts to cards and cash.
- Any government compensation, subsidy, tax treatment or rollback announcement for MDR-bearing merchants.
- Map UPI P2M transaction volumes above ₹2,000 by store format, category, merchant entity and payment aggregator to quantify gross MDR exposure.
- Review merchant-acquirer and payment-aggregator contracts for MDR liability, category eligibility, settlement deductions, dispute processes and whether the ₹300 cap is correctly applied.
- Update checkout, POS and marketplace policies to prevent explicit UPI surcharges where prohibited; train store teams and customer support on compliant messaging.
- Model tender-mix economics against cards, EMI, net banking and alternative account-to-account methods, accounting for interchange, incentives, chargebacks and conversion impact.
- Engage acquirers early on implementation dates, merchant-category coding, reporting cadence and any volume-based commercial offsets.
- Protect high-ticket conversion with targeted merchant-funded offers or loyalty incentives rather than broad price increases.