Centre to track daily whether merchants pass UPI MDR charges to consumers
The government will monitor merchant behaviour from October 15 as a 0.4% MDR takes effect on UPI merchant payments above Rs 2,000, capped at Rs 300. The move could influence checkout pricing, digital-payment acceptance and cash usage.
What happened
National Payments Corporation of India (NPCI) · The Centre will monitor daily whether merchants pass a new 0.4% MDR on UPI payments above Rs 2,000 to consumers.
Key facts
- 0.4% MDR on UPI merchant transactions above Rs 2,000
- MDR capped at Rs 300
- Flat Rs 5 fee for certain essential goods and services
- 0.02% fee for certain capital-market transactions
- UPI transactions below Rs 2,000 subsidised up to 0.15% until October 15
- UPI operating cost estimated at Rs 20,000 crore annually
- Revised MDR expected to generate about Rs 15,000 crore annually
- 24,000 crore-plus UPI transactions in 2025-26
- 30% of transactions were person-to-merchant
- 4% of person-to-merchant payments exceeded Rs 2,000
Why this matters
Prioritize partnerships with payment orchestration, merchant-acquiring and loyalty providers that can offset MDR through lower-cost routing, incentives and value-added merchant services.
What to watch
- Government guidance defining whether and how merchants may recover MDR through general pricing, convenience fees, or differential discounts.
- Daily or weekly UPI data showing a decline in merchant-payment value or count specifically above Rs 2,000.
- Enforcement actions, consumer complaint volumes, mystery-shopping findings, or public naming of merchants charging UPI surcharges.
- Payment-app and acquiring-bank changes to QR acceptance rules, merchant onboarding, settlement pricing, or transaction-limit controls.
- Growth in cash withdrawals, card usage, account-to-account transfers, and split-payment behavior at high-value checkout.
- Category-specific exemptions, MDR subsidies, or changes to the Rs 2,000 threshold and Rs 300 cap.
- Audit high-value UPI checkout flows and ensure no explicit MDR surcharge is added to consumer bills, receipts, payment links, or QR-code prompts.
- Track transaction-value bands around Rs 2,000 for changes in UPI conversion, payment-method switching, basket splitting, and cancellation rates.
- Prepare merchant communications explaining permitted pricing practices, complaint escalation, and documentation required for enforcement inquiries.
- Reassess payment-cost economics by category and margin tier; prioritize indirect mitigants such as loyalty-funded offers, settlement optimization, and negotiated acquiring rates.
- Train store and customer-service teams not to steer customers in ways that can be interpreted as prohibited pass-through, while logging consumer payment-method preferences.
- Monitor competitor behavior in organized retail and marketplaces for hidden pass-through through higher delivery fees, reduced UPI offers, or threshold-based pricing.