Government moves to enable MDR on UPI, RuPay debit payments to large merchants
A proposed amendment would remove the no-charge exemption for UPI and RuPay debit-card payments accepted by businesses with turnover above Rs 50 crore, potentially bringing MDR costs back for large marketplaces and retailers.
What happened
Finance Ministry proposes removing the no-charge exemption for UPI and RuPay debit-card payments by businesses above Rs 50 crore turnover, enabling MDR charges
Key facts
- Merchant turnover threshold: over Rs 50 crore
- Typical MDR range: 1-3%
- Small-merchant transaction subsidy threshold: up to Rs 2,000
- Incentive cap: 0.15% of transaction value
- 2026-27 budgeted subsidy: Rs 2,000 crore
- 2025-26 subsidy: Rs 2,196.21 crore
- 2024-25 subsidy: Rs 1,922.77 crore
- Transactions above Rs 2,000: 67% of payment value
- July UPI transactions: 2,236 crore
- July UPI transaction value: Rs 29.88 lakh crore
- 2021-22 to 2024-25 incentives: 11% of industry cost and 14% of potential MDR
Why this matters
Payment-cost pressure could increase the strategic value of acquiring or partnering with payment orchestration, wallet, credit, and loyalty providers that can steer transactions toward lower-cost tender types.
What to watch
- Publication of amendment text, definition of turnover, effective date and whether the threshold applies at entity, platform or seller level.
- Any proposed MDR cap, interchange structure, transaction-value exemptions or restrictions on merchant/customer surcharging.
- Finance Ministry, RBI, NPCI and parliamentary committee comments on UPI and RuPay pricing.
- Statements from large e-commerce, quick-commerce, travel, food-delivery and modern-retail companies on payment-cost exposure.
- Payment-gateway and acquiring-bank announcements of revised pricing, routing products or merchant contracts.
- Changes in UPI transaction growth, RuPay debit usage, payment-failure rates and merchant acceptance after policy clarification.
- Whether government subsidy or incentive programs for UPI acceptance are reduced, extended or replaced by MDR revenue.
- Large retailers and marketplaces will model MDR exposure by payment mix, average order value, category margin and acquiring partner.
- Payment aggregators, banks and fintechs will push for differentiated merchant discount rates, transaction-volume pricing and service bundles.
- High-volume merchants may accelerate direct bank integrations, multi-acquirer routing and payment-success optimisation to offset new fees.
- Marketplaces may attempt to shift payment costs to sellers through revised commission, settlement, advertising or logistics charges rather than explicit customer surcharges.
- Retailers may increase incentives for lower-cost payment rails, prepaid balances, bank-transfer-like options, private-label credit and cash-on-delivery reduction programs.
- Industry bodies are likely to lobby for a narrow definition of large merchant, low MDR caps, exclusions for small transactions and delayed implementation.