Government weighs reinstating UPI MDR for large merchants at 5-7 basis points
New Delhi may reverse its 2020 zero-MDR policy, charging large merchants (turnover above ₹1-1.5 crore) 5-7 basis points on UPI payments over ₹2,000. Small merchants—90% of the base—stay exempt. Decision pending amid FY26 volumes of 242 billion transactions worth ₹314 lakh crore.
What happened
Government considering reinstating MDR on UPI transactions for large merchants (turnover above ₹1-1.5 crore, payments over ₹2,000) at 5-7 basis points,
Key facts
- ₹1-1.5 crore turnover threshold
- UPI transactions above ₹2,000
- MDR 5-7 basis points
- 242 billion UPI transactions FY26
- ₹314 lakh crore value
- 90% merchants small enterprises
Why this matters
Watch this pending decision as a potential shift in payment economics—reinstated MDR could reshape merchant acquiring partnerships and create openings for payment-cost optimization plays across the 242-billion-transaction UPI base.
What to watch
- Finance Ministry / RBI official notification or Cabinet note on MDR policy
- Definition of turnover threshold (₹1 vs ₹1.5 crore) and transaction cutoff (₹2,000)
- Industry body (CAIT, MPAI) public response and lobbying intensity
- FY26 UPI incentive budget allocation in Union Budget signals
- PSP earnings commentary on monetization path
- Large retailers model incremental payment costs on above-₹2,000 UPI volumes and assess pass-through vs. absorption
- PSPs and fintechs (PhonePe, Google Pay, Paytm) recalibrate revenue models and lobby via industry bodies
- Merchants nudge high-ticket customers toward alternate rails (cards vs UPI) to optimize interchange
- CFOs stress-test margin impact given thin retail net margins on high UPI penetration