India to levy 0.4% MDR on UPI merchant payments above ₹2,000
A new government framework reportedly ends zero-MDR for higher-value merchant UPI payments, with a 0.4% fee capped at ₹300. Small merchants with monthly UPI QR receipts up to ₹1 lakh remain exempt, while merchants and apps cannot pass the charge to consumers.
What happened
India ends zero-MDR for large merchant UPI payments, imposing a 0.4% fee above Rs 2,000, capped at Rs 300. Small merchants remain exempt, while apps cannot add
Key facts
- 0.4% MDR on merchant UPI payments above Rs 2,000
- MDR capped at Rs 300 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 new fee pool to fund small-merchant UPI expansion
Why this matters
Target partnerships or acquisitions in merchant acquiring, payment orchestration, and value-added services that help larger UPI sellers absorb and manage MDR.
What to watch
- Official gazette notification, effective date, definition of merchant UPI payment and confirmation that the proposal is enacted rather than under consultation.
- Clarification of the ₹1 lakh exemption: aggregation across outlets, QR codes, legal entities, platforms and payment service providers.
- MDR revenue split among acquiring banks, PSPs, issuers, NPCI and government, plus GST treatment.
- Evidence of high-value UPI transaction-volume deceleration, ticket splitting, or migration to cards and account-to-account alternatives after launch.
- Large merchant association responses and announced changes from e-commerce, electronics, travel, jewellery and organised retail chains.
- Further changes to the no-surcharge enforcement regime, merchant discount programs or government subsidy support for UPI infrastructure.
- Model payment-cost exposure by merchant ticket size: the fee applies only above ₹2,000, making high-AOV categories the immediate risk pool.
- Prioritize acquiring and payment-orchestration capabilities that can quantify rail-level economics and route transactions based on merchant cost, approval rates and customer preference.
- Expect large retailers to revise checkout messaging, offers and tender-routing rules; monitor whether UPI discounts weaken for high-value baskets.
- Prepare compliant merchant communications: no explicit consumer surcharge, but update commercial terms, reconciliation and settlement reporting.
- Screen merchant portfolios against the ₹1 lakh monthly QR-receipts exemption threshold; merchants near the cutoff may seek entity, store or QR-code structuring advice.
- Track whether PSPs and banks retain MDR economics or whether a material share is directed to issuers, NPCI or government funds; distribution determines equity winners.