India May Introduce 40 Bps UPI MDR for Larger Merchants: Report

A proposed UPI MDR framework could levy 40 bps on eligible merchant transactions, reportedly splitting revenue 40% to issuing banks and 30% each to TPAPs and acquirers. Thresholds may apply above ₹2,000 transactions and for merchants with ₹1 crore–₹1.5 crore turnover; rules are not final.

— Source publishedFri, 11 Sept, 2026, 11:31 IST·First seen Fri, 11 Sept, 2026, 11:33 IST·Source Inc42

What happened

India may introduce a targeted UPI merchant discount rate of about 40 bps, with issuing banks receiving 40% and TPAPs and acquirers 30% each. The proposed

Key facts

  • Proposed MDR: 40 bps (0.4%)
  • Issuing banks: 40% of MDR (16 bps)
  • TPAPs: 30% of MDR (12 bps)
  • Acquiring banks: 30% of MDR (12 bps)
  • Earlier proposed MDR: 5-7 bps
  • Possible transaction threshold: above ₹2,000
  • Possible merchant turnover threshold: ₹1 Cr-₹1.5 Cr
  • August UPI transactions: 24.51 Bn
  • August UPI transaction value: ₹29.82 lakh crore
  • UPI annual transaction growth: 20%
  • FY24 UPI/RuPay incentive outlay: ₹3,631 Cr
  • FY26 initial incentive allocation: ₹437 Cr

Why this matters

The proposed fee pool could make bank, acquirer and payment-app partnerships more strategic, creating opportunities to negotiate routing, incentives and merchant-service bundles for large-format retailers.

What to watch

  • Finance Ministry, RBI and NPCI consultation papers or formal notifications specifying thresholds, exclusions and start date.
  • Whether the 40 bps rate is a ceiling, a fixed rate or subject to merchant-category and transaction-size bands.
  • Definition of merchant turnover, including treatment of group companies, marketplaces, franchises and online aggregators.
  • Confirmation of the proposed 40% issuer-bank and 30%/30% TPAP-acquirer revenue split.
  • Government budget allocations or subsidy extensions for UPI and RuPay payments.
  • Payment-app and acquirer pricing announcements, especially for enterprise merchants and QR acceptance.
  • Retailer association statements, legal challenges or evidence of merchant payment steering.
  • Model UPI acceptance cost by store format, average ticket and merchant entity turnover; isolate outlets likely to exceed proposed thresholds.
  • Review payment-routing capabilities and negotiate acquiring contracts with volume-based MDR caps, pass-through protections and blended pricing.
  • Prepare compliant customer-steering options: loyalty rewards for lower-cost rails, thresholds for card/UPI promotions and incentives for larger-basket payment methods.
  • Assess whether marketplace sellers, franchisees and subsidiaries would be independently measured for turnover eligibility.
  • Push banks, acquirers and payment apps for data on transaction-level eligibility, implementation timing, dispute handling and settlement economics.
  • Monitor competitor pricing behavior; widespread pass-through could normalize small checkout surcharges or reduced UPI-funded promotions among large retailers.

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