India sets 0.4% UPI fee on merchant payments above Rs 2,000, capped at Rs 300
The reported framework exempts small merchants with up to Rs 1 lakh in monthly UPI QR receipts, while barring apps from adding charges and merchants from passing costs to shoppers. Retailers processing larger-ticket digital payments could face new acceptance costs.
What happened
India has ended zero MDR for larger UPI merchant payments, imposing a 0.4% charge above Rs 2,000, capped at Rs 300. Small merchants remain exempt, while apps
Key facts
- 0.4% fee on merchant UPI payments above Rs 2,000
- Rs 300 fee cap for payments of Rs 75,000 and above
- Rs 5 flat fee for railways, telecom and fuel
- 0.02% rate for capital markets
- Small merchants with up to Rs 1 lakh monthly UPI QR receipts exempt
- 96% of merchant transactions shielded
- Person-to-person transfers are 37% of UPI volume and 70% of value
- 20% of fee pool to fund small-merchant UPI expansion
Why this matters
Payments and retail platforms should assess acquiring or partnering for lower-cost routing, reconciliation, and loyalty capabilities to offset merchant acceptance-cost pressure.
What to watch
- Official RBI, NPCI, Ministry of Finance or gazette notification confirming the fee, effective date, scope and whether the reported framework applies to all UPI rails.
- Clarification of the Rs 1 lakh exemption calculation: merchant-level versus outlet-level, monthly measurement, treatment of online payments and aggregation across QR codes.
- Allocation of the 0.4% fee among issuer, acquirer, PSP and network participants, including any government subsidy or reimbursement mechanism.
- Merchant association response, legal challenges and demands to permit surcharge pass-through or raise the transaction threshold.
- Changes in UPI transaction-size distribution, card share and transaction-splitting rates after any announcement.
- Payment-app product changes, including merchant plans, high-value payment routing, reward reductions or new settlement fees.
- Model tender-level margin impact by store format, category and average UPI ticket size; isolate transactions above Rs 2,000 and merchants above the Rs 1 lakh monthly QR-receipt threshold.
- Review payment-acquirer and PSP contracts for who bears MDR, settlement charges and reconciliation costs; seek blended-rate or volume-based concessions.
- Prepare compliant checkout messaging and staff guidance that does not surcharge customers while encouraging eligible alternative tenders for large baskets.
- Test loyalty-funded incentives for cards, bank transfer, EMI and retailer wallets against the incremental UPI acceptance cost.
- Monitor whether customers split transactions around the Rs 2,000 threshold and strengthen fraud controls against artificial transaction splitting.
- Reassess pricing and promotional economics in high-ticket categories such as electronics, appliances, jewelry, furniture and premium grocery.