India to levy 0.4% MDR on merchant UPI payments above Rs 2,000 from Oct 15
The proposed charge ends zero-MDR for eligible higher-value merchant UPI transactions. Payments below Rs 2,000, small merchants receiving up to Rs 1 lakh monthly, P2P transfers and credit card-linked UPI remain exempt; MDR is capped at Rs 300 for transactions of Rs 75,000 and above.
What happened
India will impose 0.4% MDR on merchant UPI payments above Rs 2,000 from October 15, 2026, ending zero-MDR for affected transactions. Merchants bear the fee,
Key facts
- 0.4% MDR on merchant UPI transactions above Rs 2,000
- Effective October 15, 2026
- 96% of merchant transactions are below Rs 2,000
- Small merchants receiving up to Rs 1 lakh monthly via UPI are exempt
- MDR capped at Rs 300 for transactions of Rs 75,000 and above
- Rs 5 flat MDR for eligible essential and thin-margin sectors
- 0.02% MDR for mutual fund, securities, stockbroker and dealer payments, capped at Rs 300
- UPI processed over 24,162 crore transactions worth around Rs 314 lakh crore in FY2025-26
Why this matters
Prioritize partnerships or acquisitions in payment orchestration, merchant acquiring and value-added checkout tools that can help retailers manage new UPI routing and cost-control needs.
What to watch
- Final government notification, statutory basis and confirmation that the Oct. 15 effective date holds.
- Whether the Rs 2,000 threshold applies per transaction, aggregated order, refund-adjusted value or payment attempt.
- Clarification of eligibility rules for marketplaces, payment aggregators, QR-only merchants, subscription payments and offline versus online UPI.
- Acquirer announcements on actual merchant pricing, interchange allocation, GST treatment and settlement timing.
- Merchant behavior data: decline in UPI share for Rs 2,000-plus baskets, growth in split tenders, or shifts to card-linked UPI despite its exemption.
- Industry lobbying, court challenges, merchant association responses and any government reimbursement or incentive program.
- Model exposure by average order value, monthly UPI merchant volume and share of UPI transactions above Rs 2,000.
- Review payment-acquirer contracts for MDR pass-through clauses, settlement fees and category-specific pricing.
- Test compliant checkout prompts that favor lower-cost tender types without degrading UPI conversion or customer trust.
- Prioritize payment-routing capability for high-ticket orders, including dynamic tender incentives and split-payment controls.
- Prepare margin and pricing scenarios for categories with high UPI penetration and low gross-margin headroom.
- Engage payment partners on enterprise MDR tiers, bundled services and transaction-level reporting before the proposed Oct. 15 start date.