New UPI MDR framework targets select merchant payments above ₹2,000
UPI person-to-person transfers remain free, while specified merchant payments above ₹2,000 may attract MDR. Eligible small merchants retain protections, with roughly 96% of merchant transactions expected to remain unaffected.
What happened
New UPI MDR rules retain free P2P transfers and most merchant payments. Specified merchant transactions above ₹2,000 face MDR, while eligible small merchants
Key facts
- 0% fee for P2P UPI transactions
- ₹2,000 P2M threshold for MDR
- ₹1 lakh monthly P2PM receipts protected for eligible small merchants
- 0.4% MDR on specified P2M transactions above ₹2,000
- ₹300 maximum MDR for transactions of ₹75,000 and above
- ₹5 flat MDR for certain essential-sector transactions above ₹2,000
- 0.02% MDR on capital-market transactions, capped at ₹300
- About 4% of merchant transactions affected
- About 96% of merchant transactions unaffected
- 5% of MDR collections allocated to a small-merchant UPI-adoption fund
Why this matters
Evaluate partnerships or acquisitions in merchant acquiring, payment orchestration and small-business enablement that can capture higher-value UPI flows while benefiting from the 5% adoption-funding pool.
What to watch
- Final notification defining eligible merchant categories, effective date, MDR payer, and treatment of aggregators and marketplaces.
- Clarification of whether the ₹2,000 threshold applies per transaction, invoice, order, settlement, or cumulative customer payment.
- Issuer, acquirer, PSP, and payment-aggregator pricing circulars showing fee allocation and implementation mechanics.
- UPI share changes for transactions above ₹2,000 versus cards, wallets, EMI, net banking, and cash-on-delivery.
- Evidence of basket splitting, repeat micro-transactions, or rising payment-failure rates near the threshold.
- Rules governing use and distribution of the 5% small-merchant adoption fund.
- Large-merchant litigation, industry-body responses, or government statements on consumer surcharging.
- Segment checkout payment economics by ticket size, merchant category, and customer cohort; identify orders consistently above ₹2,000.
- Model margin impact under merchant absorption, consumer surcharge, and tender-steering scenarios, including the ₹300 cap.
- Add payment-method routing rules for high-value carts, prioritizing the lowest-net-cost tender without degrading conversion.
- Prepare clear checkout disclosures if MDR is passed through, with compliance review for category-specific pricing rules.
- Target small merchants for UPI acceptance expansion using the adoption-fund incentive, especially in omnichannel assisted-selling and long-tail marketplace supply.
- Monitor whether higher-ticket merchants introduce UPI-specific discounts, minimum-order thresholds, or split-payment options.