India to levy UPI MDR on select merchant payments above Rs 2,000 from Oct. 15
A new merchant-paid UPI MDR framework will charge 0.4% on specified P2M transactions above Rs 2,000, capped at Rs 300. Essential categories face a flat Rs 5 fee, while small QR-code merchants taking up to Rs 1 lakh monthly remain exempt.
What happened
India will introduce merchant-paid UPI MDR on select P2M payments above Rs 2,000 from October 15, 2026. Consumers and small merchants remain protected, while
Key facts
- MDR of 0.4% on specified P2M UPI transactions above Rs 2,000
- MDR capped at Rs 300 for transactions of Rs 75,000 and above
- Flat Rs 5 MDR above Rs 2,000 for railways, telecom, insurance, fuel and agricultural inputs
- Small merchants receiving up to Rs 1 lakh monthly via UPI QR codes retain zero MDR
- 5% of total MDR collections earmarked for a small-merchant fund
- UPI processed 2,451 crore transactions worth Rs 29.9 lakh crore in August 2026
Why this matters
Target partnerships or acquisitions that strengthen merchant fee-routing, category classification and UPI acceptance software as larger P2M transactions become monetizable.
What to watch
- Final government/NPCI circular defining covered merchant categories, transaction types, merchant liability, and treatment of refunds.
- Clarification on whether merchants may levy payment-method surcharges or offer discounts for lower-cost instruments.
- UPI transaction-value distribution above Rs 2,000 and changes in average ticket size after Oct. 15.
- Merchant acceptance rates for UPI at high-ticket checkout versus cards, net banking, and pay-later products.
- Acquirer/PSP fee schedules, merchant onboarding changes, and new high-value UPI routing products.
- Growth in transactions clustered just below Rs 2,000, indicating payment splitting or basket restructuring.
- Industry lobbying from large retailers, marketplaces, hospital chains, travel firms, and merchant associations.
- Model UPI payment mix by order-value band, especially transactions just above Rs 2,000 and categories with high average order values.
- Renegotiate PSP/acquirer pricing and confirm whether the statutory MDR is passed through in full or offset by volume incentives.
- Test checkout messaging and payment-routing rules without explicit consumer surcharges; monitor conversion, authorization success, and payment-method substitution.
- Audit merchant category codes, essential-category eligibility, QR-code merchant status, and monthly receipt thresholds.
- Prepare controls against artificial order splitting, duplicate-payment abuse, and staff-led payment steering.
- Reforecast gross margin for affected stores, marketplaces, travel, electronics, healthcare, and premium grocery baskets.