India to introduce MDR on select UPI merchant payments above Rs 2,000 from Oct 15
A proposed 0.4% merchant discount rate, capped at Rs 300, would apply to select UPI merchant payments above Rs 2,000. Small merchants and most transactions would remain exempt, while banks, payment apps and aggregators negotiate revenue sharing and potential cost pass-through.
What happened
India will introduce MDR on select UPI merchant payments above Rs 2,000 from October 15, 2026. Small merchants and most transactions remain exempt, while banks,
Key facts
- October 15, 2026
- Rs 2,000
- 0.4% MDR
- Rs 300 cap
- Rs 75,000
- Rs 5 flat fee
- 0.02% MDR
- Rs 1 lakh per month
- 5% of MDR collections
- 96% of person-to-merchant transactions
- 24.5 billion transactions
- Rs 29.8 lakh crore
- Rs 16,000 crore-Rs 17,000 crore annually
- 60% banks
- 25% payment apps
- 15% aggregators
Why this matters
Payments platforms and retail-tech buyers should prioritize partnerships or targets with merchant-acquiring, routing and settlement capabilities as UPI revenue-sharing economics are renegotiated.
What to watch
- Final government or NPCI notification defining eligible merchant categories, transaction types, exclusions and implementation date.
- Clarification on whether the Rs 2,000 threshold applies per transaction, per invoice, per day or after refunds and reversals.
- Bank, PSP and payment-aggregator announcements on MDR sharing, merchant pricing and settlement terms.
- Regulatory guidance on merchant surcharging, cash discounts, payment steering and transaction splitting.
- UPI payment-mix shifts in high-ticket categories toward cards, cash, net banking or EMI instruments.
- Merchant association responses and evidence of large retailers revising checkout/payment policies.
- Any government subsidy, reimbursement or interchange-style support intended to preserve UPI acceptance economics.
- Model exposure by store format, category and average UPI ticket size; isolate transactions above Rs 2,000 and estimate gross MDR impact under 0.4% and the Rs 300 cap.
- Review payment-routing contracts with acquirers, PSPs and aggregators to determine who absorbs the fee, revenue-share mechanics, settlement changes and potential renegotiation rights.
- Avoid broad consumer surcharges initially; test compliant, non-punitive payment-mix incentives only where margin pressure is material.
- Prepare frontline and checkout messaging for customer questions, especially for high-value purchases and split-payment requests.
- Reassess promotional economics for high-ticket online and omni-channel orders, where MDR could compound delivery, returns and marketplace commission costs.
- Track whether competitors absorb the fee, steer customers to cards/cash, or set internal thresholds near Rs 2,000.