Government to retain UPI MDR framework for merchant payments above Rs 2,000
The government will not review the proposed UPI merchant-discount-rate framework effective October 15, sources said. The rules would affect about 4% of merchant transactions, while more than 95% of person-to-merchant payments remain outside MDR.
What happened
Government will not review the new UPI MDR framework for merchant payments above Rs 2,000. The October 15 rules affect an estimated 4% of merchant transactions,
Key facts
- 0.4% MDR on large merchant UPI payments above Rs 2,000
- Rs 300 per-transaction MDR cap
- Rs 5 flat MDR for select categories above Rs 2,000
- 0.02% MDR for capital-market transactions, capped at Rs 300
- Around 4% of merchant transactions expected to be affected
- More than 95% of person-to-merchant transactions remain outside MDR
- 5% of MDR collections allocated to small-merchant acceptance fund
- 24.51 billion UPI transactions worth Rs 29.82 lakh crore in August 2026
Why this matters
Payments, POS and merchant-acquiring platforms may gain strategic value by helping large retailers optimize MDR exposure, settlement economics and alternative payment acceptance.
What to watch
- Formal government notification, final MDR rate structure, merchant-size definition and October 15 implementation details.
- Whether MDR is borne by merchants alone or shared among issuers, acquirers, PSPs and payment-network participants.
- Clarification on merchant ability to levy convenience fees, offer payment-method discounts or set transaction thresholds.
- Large retailer, marketplace, bank and payment-app announcements on UPI checkout pricing or promotional changes.
- Changes in UPI transaction mix above Rs 2,000, especially in electronics, travel, fashion, jewellery and grocery bulk baskets.
- Industry lobbying intensity and any review, deferment or expansion of exemptions.
- Audit UPI transaction value distribution by merchant format, category and ticket size to quantify exposure above Rs 2,000.
- Reprice payment acceptance contracts with acquirers/PSPs and seek MDR caps, volume rebates and routing flexibility.
- Protect conversion in high-ticket checkouts by testing payment-method incentives, EMI offers and card/UPI routing rather than blanket consumer fees.
- Update merchant profitability models for MDR cost absorption, particularly in low-margin omnichannel and marketplace businesses.
- Prepare retailer and industry-association positions on threshold design, surcharge restrictions and small-merchant exemptions.