India sets 0.4% MDR on UPI merchant payments above Rs 2,000, capped at Rs 300
The announced framework ends zero-MDR for larger UPI merchant payments while exempting small QR merchants earning up to Rs 1 lakh a month. Merchants cannot pass charges to consumers; implementation timing was not specified.
What happened
India ends zero-MDR for larger UPI merchant payments, imposing a 0.4% fee above Rs 2,000 with a Rs 300 cap. Small QR merchants remain exempt, while apps cannot
Key facts
- 0.4% MDR on merchant UPI payments above Rs 2,000
- Rs 300 MDR cap for payments of Rs 75,000 and above
- Rs 5 flat fee for railways, telecom and fuel transactions
- 0.02% rate for capital markets
- Small merchants earning up to Rs 1 lakh monthly via UPI QR codes exempt
- 96% of merchant transactions shielded from new charges
- 20% of fee pool allocated to small-merchant UPI expansion
- Person-to-person transfers represent 37% of UPI volume and 70% of value
Why this matters
Payments, acquiring, and retail-tech buyers should reassess targets with large-merchant UPI exposure, as regulated MDR economics may improve strategic value in acceptance infrastructure while preserving small-merchant volume through exemptions.
What to watch
- Formal implementation date, final notification language and whether the framework is mandatory or proposed.
- Definition of merchant income, treatment of marketplace sellers, franchisees and multi-store chains under the Rs 1 lakh exemption.
- Whether the Rs 2,000 threshold applies per transaction, per order, per payment attempt or after refunds and partial payments.
- Acquirer and PSP pricing announcements, especially additional gateway, settlement or service fees.
- RBI, NPCI and finance-ministry guidance on merchant steering, discounts, split payments and payment-method incentives.
- UPI share changes in high-ticket categories versus cards, EMI, net banking and cash-on-delivery.
- Merchant association lobbying and any subsidy or reimbursement mechanism for MDR.
- Model blended payment-cost exposure by average UPI ticket size, transaction mix above Rs 2,000, and merchant monthly turnover.
- Prioritize payment-routing and tender-steering capabilities at large-format, electronics, travel, healthcare and marketplace checkouts.
- Renegotiate PSP, acquirer and payment-gateway contracts, focusing on MDR pass-through, reconciliation fees, failed-payment handling and volume rebates.
- Test consumer-neutral incentives for lower-cost tenders without violating the ban on passing UPI charges to consumers.
- Protect small-seller onboarding and QR acceptance economics; verify qualification for the Rs 1 lakh monthly-income exemption.
- Prepare merchant communications that distinguish compliance requirements from optional checkout experience changes.