India to levy MDR on select UPI merchant payments above ₹2,000 from October 15
India will introduce a 0.4% MDR on specified merchant UPI payments above ₹2,000, capped at ₹300 for transactions of ₹75,000 and above. Most P2M payments are expected to remain free, but the change ends the broad zero-MDR regime in place since 2020.
What happened
India will introduce MDR charges on specified merchant UPI payments above ₹2,000 from October 15, ending the broad zero-MDR regime. P2P payments and most
Key facts
- 0.4% MDR on specified merchant UPI payments above ₹2,000
- MDR capped at ₹300 for payments of ₹75,000 and above
- ₹5 flat fee for railways, telecom and fuel transactions
- 0.02% rate for capital-market transactions
- 96% of P2M transactions expected to remain unaffected
- zero-MDR regime had been in place since January 2020
Why this matters
Evaluate partnerships or acquisitions in merchant acquiring, payment orchestration, and UPI value-added services that can help merchants absorb or optimize the new costs on larger transactions.
What to watch
- Final notification defining the covered merchant categories, exemptions, payer/payee eligibility and treatment of aggregators.
- Evidence of merchant surcharge permissions or enforcement against payment-method steering.
- Changes in UPI transaction-value mix above ₹2,000, especially in electronics, travel, jewellery, hospitals and wholesale-linked retail.
- Acquirer pricing notices, gateway fee changes and PSP incentives for high-ticket UPI acceptance.
- Government statements on UPI subsidy funding, broader MDR restoration, or differentiated pricing by transaction value and merchant category.
- Consumer behavior shifts toward cards, credit-on-UPI, split payments or alternative wallets for large purchases.
- Segment UPI acceptance economics by ticket size, merchant category and payment-service-provider contract; identify merchants with meaningful volume above ₹2,000.
- Model pass-through options: shelf-price uplift, cash/card/UPI differential, minimum-ticket rules, instalment offers and loyalty-funded fee absorption.
- Ask acquiring partners whether MDR applies to all merchant types, which transaction categories are specified, and whether GST or additional processing fees apply.
- Prepare customer messaging that preserves UPI convenience while avoiding visible payment-method penalties that could create regulatory or reputational risk.
- Monitor whether high-value merchants increase card acceptance incentives, BNPL/EMI promotion, QR-linked bank-transfer alternatives or transaction splitting.