Government weighs MDR on select high-value UPI merchant payments
India may permit merchant discount rates on certain UPI person-to-merchant payments above ₹2,000, while smaller transactions remain fee-exempt. Rates and eligible categories are not finalised; any move could raise payment-acceptance costs for retailers handling high-value purchases.
What happened
India may allow MDR charges on select UPI merchant payments above ₹2,000, though no fee has been imposed yet. The move could raise payment-acceptance costs for
Key facts
- UPI transactions up to ₹2,000 remain fee-exempt
- Potential MDR of around 0.4% for some high-value P2M transactions
- Credit-card MDR: around 1-3%
- Debit-card MDR: up to 0.9%
- High-value P2M UPI transactions above ₹2,000 were about 4% of volume but roughly two-thirds of value in 2025-26
- More than 24,000 crore UPI transactions worth ₹314 lakh crore in 2025-26
- More than 55 crore UPI users
- Estimated annual ecosystem cost: around ₹20,000 crore
Why this matters
Payments, acquiring, and retail-tech players should monitor the final framework for partnership or product opportunities around high-value UPI acceptance, surcharge compliance, and cost optimisation.
What to watch
- Official Ministry of Finance, RBI, NPCI, or cabinet consultation specifying the ₹2,000 threshold, eligible merchant categories, and MDR cap.
- Whether MDR applies only to large merchants, specified MCCs, or all P2M transactions above the threshold.
- Confirmation of who bears the fee: merchant, acquiring bank, payment aggregator, issuer, consumer, or government subsidy.
- Payment aggregator announcements of revised UPI commercial pricing or enterprise merchant contracts.
- Retailer and industry-association responses, especially requests for exemptions for essential goods, MSMEs, and marketplaces.
- Changes in high-ticket UPI share, card usage, EMI penetration, and payment failures following any policy announcement.
- Rules governing customer surcharges, cash-discounting, or payment-method incentives.
- Model payment-acceptance cost exposure by UPI ticket band, category, store format, and merchant entity.
- Prepare checkout routing rules that promote lower-cost rails for transactions above ₹2,000 without creating customer friction.
- Review contracts with payment aggregators and banks for MDR pass-through language, pricing flexibility, and reporting transparency.
- Test payment-method incentives such as card-linked offers, bank-transfer prompts, EMI promotion, and loyalty rewards rather than explicit UPI surcharges.
- Prioritize high-value UPI categories including electronics, jewellery, appliances, furniture, travel, premium fashion, and marketplace seller payments for margin-impact analysis.
- Build a customer-communication and compliance playbook for any payment-method steering restrictions.