Government, IBA seek safeguards to stop UPI MDR being passed to shoppers
A UPI MDR framework due October 15 proposes a 0.4% fee on specified person-to-merchant transactions above Rs 2,000, while fuel and select thin-margin sectors would face a flat Rs 5 charge. The government and IBA are working on measures to prevent merchants from passing the cost to consumers.
What happened
Government and IBA will explore safeguards preventing merchants from passing UPI MDR to consumers. The framework sets 0.4% MDR above Rs 2,000, with a Rs 5 flat
Key facts
- 0.4% MDR on specified person-to-merchant UPI transactions above Rs 2,000
- Rs 5 flat MDR for fuel and certain thin-margin sectors above Rs 2,000
- October 15
Why this matters
Payments and fintech partners with low-cost merchant acceptance, surcharge-compliance tools, and sector-specific pricing solutions could become more strategic as retailers adapt to the new UPI fee regime.
What to watch
- Final October 15 framework wording, including covered merchant categories, exemptions, transaction definitions and effective date.
- Rules defining prohibited pass-through, enforcement authority, penalties and whether differential pricing or payment-method discounts are permitted.
- IBA and bank guidance on merchant onboarding, fee collection and settlement mechanics.
- Merchant-association response and evidence of acceptance pullbacks, cash steering or reduced UPI QR deployment.
- UPI transaction mix changes around the Rs 2,000 threshold, especially transaction splitting and payment-method switching.
- Government decision on reimbursement or subsidy mechanisms for banks and payment service providers.
- Fuel, grocery, telecom, travel and other high-frequency merchant pricing actions after rollout.
- Segment checkout payments by ticket size, merchant category and customer cohort to quantify exposure above Rs 2,000.
- Model margin impact under 0.4% MDR, Rs 5 sectoral fee and partial indirect price recovery scenarios.
- Update merchant contracts and checkout communications to prohibit explicit consumer UPI surcharges where required.
- Test targeted incentives for lower-cost payment methods only after confirming regulatory treatment and consumer-protection constraints.
- Prepare procurement discussions with acquirers, banks and payment aggregators on MDR sharing, settlement terms and volume-based rebates.
- Monitor whether competitors reduce UPI-linked promotions, introduce order-value thresholds or reprice high-ticket assortments.