India to levy 0.4% MDR on eligible UPI merchant payments above Rs 2,000 from October 15

Merchants will bear a 0.4% charge on qualifying UPI payments above Rs 2,000, while consumers remain exempt. Small merchants, lower-value transactions and selected essential or thin-margin categories would receive exemptions or capped fees.

— Source publishedThu, 17 Sept, 2026, 07:30 IST·First seen Thu, 17 Sept, 2026, 07:42 IST·Source YourStory · Capital

What happened

India will introduce a 0.4% MDR on eligible UPI merchant payments above Rs 2,000 from October 15. Merchants bear the fee, while consumers remain exempt; small

Key facts

  • 0.4% MDR
  • Rs 2,000 transaction threshold
  • 96% of merchant transactions below threshold
  • Rs 1 lakh monthly small-merchant threshold
  • Rs 5 flat fee for essential and thin-margin sectors
  • 0.02% MDR for mutual funds, securities and stockbrokers
  • Rs 300 MDR cap
  • Paytm shares rose over 7%

Why this matters

Retailers and platforms may seek partnerships or acquisitions in payment orchestration, closed-loop wallets and acquiring technology to reduce UPI cost exposure and strengthen control over checkout economics.

What to watch

  • Publication of final notification, definitions of eligible transactions, merchant-size thresholds and the exact October 15 enforcement date.
  • Whether the 0.4% fee includes GST and whether it is capped per transaction or per merchant category.
  • Exemption lists for essential goods, fuel, healthcare, government payments, small merchants and low-margin sectors.
  • RBI, NPCI and ministry guidance on merchant surcharging, cash-discounting and payment-method steering.
  • Acquirer and PSP pricing responses, including blended-rate offers and changes to settlement, incentive or interchange arrangements.
  • UPI transaction-value distribution above Rs 2,000 and any observable migration toward cards, credit-on-UPI, wallets or transaction splitting.
  • Retail-industry lobbying, legal challenges and statements from major banks, aggregators and large merchant associations.
  • Model UPI cost exposure by store format, category, average order value, transaction count and merchant entity to identify payments above Rs 2,000.
  • Open negotiations with acquiring banks, PSPs and payment aggregators on blended MDR, volume rebates, category-specific caps and routing economics.
  • Review checkout, invoicing and POS capabilities for compliant tender steering, split payments, payment-method promotions and surcharge disclosures.
  • Protect high-frequency UPI conversion by testing non-price levers such as loyalty rewards, faster refunds and preferred-payment offers rather than blanket consumer fees.
  • Assess supplier, marketplace-seller and franchise contracts to determine whether payment-cost pass-through provisions need revision.
  • Prepare category-level margin actions for high-ticket electronics, apparel, home, travel and omnichannel orders, while avoiding changes in regulated or essential categories.

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