Merchants to bear 0.4% MDR on select UPI payments above ₹2,000 from 15 October 2026
Finance Minister Nirmala Sitharaman said the MDR will apply to specified merchant UPI transactions above ₹2,000, with merchants—not consumers—liable. QR-code merchants collecting up to ₹1 lakh monthly are exempt; the fee is capped at ₹300 on transactions of ₹75,000 or more.
What happened
Finance Minister Nirmala Sitharaman said merchants, not consumers, will bear a 0.4% MDR on specified merchant UPI payments above ₹2,000 from 15 October 2026.
Key facts
- 0.4% MDR
- ₹2,000 transaction threshold
- 15 October 2026 start date
- ₹300 fee cap
- ₹75,000 transaction level for cap
- 96% of merchant UPI transactions unaffected
- ₹1 lakh monthly UPI QR collections exemption threshold
Why this matters
Prioritize payments-platform, acquiring, and merchant-software targets that can help enterprises optimize tender routing, surcharge compliance, and reconciliation as merchant-funded UPI costs emerge.
What to watch
- Final notification defining 'specified merchant UPI transactions,' eligible merchant categories, exclusions and treatment of online versus QR-present payments.
- Clarification on whether any consumer surcharge, convenience fee or differential pricing is allowed and how enforcement will work.
- Merchant-category data showing exposure among travel, healthcare, education, electronics, utilities, insurance and government-related payments.
- PSP, bank and gateway announcements on fee pass-through, merchant onboarding changes, routing products and promotional offsets.
- Evidence of UPI share loss in high-ticket transactions to cards, net banking, RTGS/NEFT, EMI or closed-loop wallets after implementation.
- Changes to the ₹1 lakh monthly QR-merchant exemption threshold or the ₹300 transaction cap.
- Merchant association litigation, lobbying, or requests for category-level exemptions.
- Audit UPI transaction mix above ₹2,000 by merchant category, ticket band, margin profile and monthly QR collections.
- Model effective acceptance-cost exposure after the ₹300 cap, including the share of transactions above ₹75,000.
- Prepare checkout and POS tender-routing rules for high-value baskets, while validating surcharge and customer-disclosure compliance.
- Payment providers should package MDR analytics, smart-routing, reconciliation and merchant-specific pricing tools before the October 2026 start date.
- Large merchants should renegotiate acquiring, gateway and bank contracts, using volume commitments and multi-PSP routing as leverage.
- Monitor whether competitors absorb the cost; pricing response will be a key determinant of whether MDR becomes a margin hit or an industry-wide price reset.