New UPI MDR framework puts fees on a narrow slice of merchant payments
P2P UPI payments remain free, while specified person-to-merchant payments above ₹2,000 may attract 0.4% MDR, capped at ₹300. Merchants with monthly UPI QR receipts below ₹1 lakh and eligible essential categories receive protections; about 96% of merchant transactions are expected to remain unaffected.
What happened
New UPI MDR rules keep all P2P payments free and exempt most merchant payments. Specified P2M transactions above ₹2,000 face MDR, while small merchants and
Key facts
- 0.4% MDR on specified person-to-merchant payments above ₹2,000
- ₹300 maximum MDR for transactions of ₹75,000 and above
- ₹5 flat MDR for eligible essential-sector transactions above ₹2,000
- 0.02% MDR for capital-market transactions, capped at ₹300
- ₹1 lakh monthly UPI QR receipts threshold for protected small merchants
- 96% of merchant transactions expected unaffected
- MDR applies to about 4% of merchant transactions
- 5% of MDR collections allocated to small-merchant UPI adoption fund
- P2P payments represent about 70% of UPI transaction value
Why this matters
Prioritize partnerships with acquirers, payment orchestration platforms, and enterprise merchants that can optimize routing and value-added services around the newly chargeable high-value UPI flows.
What to watch
- Final implementation date, transaction taxonomy and clarification of which P2M rails, merchant categories and payment credentials are in scope.
- Published rules for calculating the ₹1 lakh monthly QR-receipt protection and treatment of multi-store, franchise and aggregator merchant accounts.
- Issuer, acquirer and payment-aggregator pricing notices, including whether any portion of MDR is rebated or waived for strategic merchants.
- Weekly changes in UPI ticket-size distribution, high-value P2M authorization volumes, payment-mode mix and merchant settlement deductions.
- Merchant association responses, legal challenges or policy revisions following early implementation.
- Evidence that banks reinvest MDR proceeds in UPI acceptance, fraud prevention, offline QR infrastructure or merchant onboarding.
- Payment aggregators should map merchant IDs, MCCs, monthly QR receipt thresholds and transaction types to determine which flows are chargeable before changing pricing.
- Large retailers should model net MDR exposure by basket value, payment mode and category, then decide whether to absorb fees, renegotiate acquiring terms, or steer tender at checkout.
- Acquirers should update merchant contracts, settlement reporting, dispute workflows and customer communications to distinguish P2P, exempt P2M and chargeable P2M transactions.
- Retailers should monitor whether covered higher-ticket UPI payments migrate to cards, net banking, pay-later products or split-tender behavior.
- Finance teams should treat the MDR as a variable cost concentrated in eligible high-AOV categories rather than applying a blended UPI cost assumption across all transactions.