Government may permit MDR on high-value UPI merchant payments
The government is reportedly considering a 25–30 basis-point merchant discount rate on high-value UPI transactions and payments to large commercial entities. If approved by Parliament and notified, the change could raise digital-payment acceptance costs for retailers after years of zero-MDR UPI policy.
What happened
The government may allow 25-30 basis points MDR on high-value UPI merchant payments and large commercial entities, ending zero-MDR restrictions. The proposal
Key facts
- 25-30 basis points proposed MDR
- 25 paise per ₹100 at 25 basis points
- ₹25 per ₹10,000 paid
- MDR potentially applicable above ₹2,000
- estimated ₹13,000 crore annual revenue
- UPI processes over 23 billion monthly transactions
- UPI monthly transaction value close to ₹30 lakh crore
- UPI accounts for 88% of digital transactions
- potential addition of 600 million users
- projected 100-150 billion monthly transactions
Why this matters
Retail and payments leaders should evaluate partnerships, routing capabilities, and value-added payment services that can offset prospective MDR costs for large-merchant UPI flows.
What to watch
- Formal Ministry of Finance, RBI, NPCI, or Parliament language specifying merchant-size and transaction-value thresholds.
- Whether MDR is charged to merchants only, shared with banks/payment platforms, or subsidized by the government.
- Exemptions for grocery, fuel, utilities, public services, MSMEs, and digitally enabled small merchants.
- NPCI circulars on interchange, acquirer economics, routing, settlement, and compliance timing.
- Large merchant association statements and any coordinated resistance to MDR implementation.
- Acquirer and payment-gateway pricing changes, including new enterprise UPI rate cards.
- Evidence of consumers switching high-value purchases toward cards, EMI products, or bank-transfer methods.
- Model UPI acceptance costs by merchant category, average ticket size, annual UPI GMV, and likely exemption thresholds.
- Prepare checkout-routing rules for high-value baskets, comparing UPI MDR against cards, BNPL, net banking, wallets, and bank-transfer options.
- Renegotiate acquiring and payment-gateway contracts early, seeking blended-rate caps, volume rebates, and transaction-value tiering.
- Assess whether high-value UPI payment fees can be offset through supplier-funded promotions, loyalty incentives, or reduced cash-on-delivery handling costs.
- Avoid visible UPI surcharges unless explicitly permitted; prioritize neutral payment-choice messaging to limit customer backlash.
- Track competitive response from marketplaces, electronics chains, travel platforms, and large-format retailers, where high-ticket transactions are most exposed.