Centre weighs MDR of up to 0.35% on high-value UPI payments
The proposed charge would apply to UPI transactions above Rs 2,000 at large merchants, while businesses with turnover up to Rs 1.5 crore may be exempt. Consumer UPI payments would remain free, but larger retailers could face added acceptance costs.
What happened
The Centre is considering MDR charges on high-value UPI and RuPay debit-card payments, while exempting smaller merchants. The proposal could raise
Key facts
- 0.25%-0.35% proposed MDR on UPI transactions above Rs 2,000 for large merchants
- Merchants with annual turnover up to Rs 1.5 crore likely exempt
- 0.15% government incentive on UPI transactions below Rs 2,000
- Credit-card MDR around 2%; non-RuPay debit-card MDR around 0.9%
- Transactions of Rs 2,000 and above are 4% of P2M UPI transactions
- 86% of P2M UPI transactions are below Rs 500; 10% are Rs 501-2,000
- Around 60 million Indian merchants accept digital payments; 90% have turnover up to Rs 20 lakh
- DFS said incentives cover about 11% of industry costs and 14% of potential MDR revenue
- Zeta expects UPI MDR of 0.05%-0.07% and RuPay debit MDR of 0.15%-0.20%
- UPI recorded 23.66 billion transactions in July 2026
- FY26 UPI volume exceeded 241.62 billion transactions and value reached about Rs 314 lakh crore
Why this matters
The policy could increase the strategic value of payment-routing, merchant-acquiring and checkout-optimisation partnerships that help large retailers manage UPI acceptance costs.
What to watch
- Final finance ministry, RBI, or NPCI notification specifying merchant categories, turnover test, threshold calculation, and effective date.
- Whether MDR is charged to merchants only or whether any form of consumer surcharge is permitted or prohibited.
- Definition of 'large merchant,' including treatment of chains, franchises, marketplaces, aggregators, and GST-linked group turnover.
- Acquirer and payment-gateway announcements on revised UPI pricing, settlement terms, and incentives.
- Changes in UPI transaction distribution just below and above Rs 2,000, especially in electronics, grocery, fashion, pharmacy, and quick commerce.
- Retailer migration toward RuPay credit cards on UPI, card acceptance, pay-later products, or direct bank-payment rails.
- Any government subsidy or compensation mechanism for banks and payment service providers that reduces the need for merchant MDR.
- Model incremental acceptance cost by store format, payment mix, average basket value, and UPI transactions above Rs 2,000.
- Audit checkout flows for compliant payment steering: promote low-cost rails without making consumer UPI payments meaningfully harder.
- Renegotiate acquiring and gateway contracts, seeking blended MDR caps, volume rebates, and lower pricing for debit cards, net banking, and payment links.
- Review promotional funding on high-value UPI orders; shift discounts toward merchant-funded loyalty, bank offers, or lower-cost payment rails.
- Prepare merchant communications and POS training so staff can explain payment options without imposing unauthorized consumer surcharges.
- Track whether marketplace sellers, franchisees, and third-party delivery partners bear the fee contractually or whether the platform absorbs it.