India to levy 0.4% UPI MDR on merchant payments above ₹2,000 from Oct. 15
Low-value UPI payments and small merchants will remain exempt, while fees on larger merchant transactions will be capped at ₹300. The change raises acceptance costs for bigger retailers and could reshape payment-routing choices.
What happened
India will levy 0.4% MDR on merchant UPI payments above ₹2,000 from October 15, while protecting low-value transactions and small merchants. The change may
Key facts
- UPI payments up to ₹2,000 remain protected from MDR
- 0.4% MDR on person-to-merchant UPI payments above ₹2,000
- ₹300 MDR cap for payments above ₹75,000
- Small merchants receiving up to ₹1 lakh monthly through UPI QR codes are exempt
- August 2026: 24.5 billion UPI transactions worth nearly ₹30 trillion
- ₹1,500 crore subsidy for eligible low-value small-merchant payments in 2024-25
- Estimated annual processing and network costs: ₹20,700 crore
- About 4% of transactions by volume but roughly two-thirds by value are MDR-affected
- Typical credit-card transaction fee: 1.6%; estimated discounted cost: 1.1%
Why this matters
Payments, acquiring, and checkout-platform targets with strong enterprise merchant distribution could become more strategic as larger retailers seek tools to optimize routing and manage newly differentiated UPI acceptance costs.
What to watch
- Final government or NPCI circular defining eligible merchant categories, transaction aggregation rules, GST treatment, exemptions, and enforcement mechanics.
- Whether the ₹300 transaction cap meaningfully protects high-value purchases or leaves a broad band of mid-ticket retail transactions exposed.
- Acquirer and payment-gateway announcements on MDR pass-through, revised merchant pricing, and differential rates by UPI rail or merchant category.
- Changes in UPI share for transactions above ₹2,000 versus credit cards, debit cards, EMI, net banking, wallets, and cash on delivery.
- Retailer announcements of tender-specific offers, checkout nudges, convenience fees, minimum-order thresholds, or reduced UPI-linked cashback.
- Political and industry response ahead of implementation, including requests to preserve zero-MDR status for additional merchant segments.
- Segment payment volumes by transaction value, merchant category, channel, and UPI provider to quantify exposure above the ₹2,000 threshold.
- Renegotiate acquiring and payment-gateway contracts, focusing on MDR pass-through, transaction caps, routing controls, reconciliation fees, and chargeback-related costs.
- Test compliant checkout messaging and promotions that preserve UPI conversion for smaller baskets while improving economics on high-ticket orders.
- Review whether delivery, marketplace, franchise, or seller-of-record structures change which entity bears the MDR and whether costs can be contractually passed through.
- Update gross-margin and promotional-budget assumptions for categories with high average selling prices, especially electronics, apparel, furniture, travel, luxury, and omnichannel department retail.