NPCI defends UPI MDR on larger merchant payments as payment firms expand devices
NPCI says the proposed 0.4% MDR on person-to-merchant UPI payments above Rs 2,000 will fund security and infrastructure. The levy is expected to fall mainly on large businesses, while PhonePe and Pine Labs plan new frontline hiring and payment-device rollouts.
What happened
NPCI chief Dilip Asbe defended new UPI MDR charges for transactions above Rs 2,000, citing cyber-security and infrastructure costs. The levy may affect larger
Key facts
- 0.4% MDR on person-to-merchant UPI payments above Rs 2,000
- Rs 300 maximum MDR per transaction
- Rs 13,000 crore to Rs 15,000 crore estimated first-year MDR collections
- 96% of UPI transactions by volume and 75% by value exempt
- 75% of UPI merchants have never received a payment above Rs 2,000
- Businesses processing above Rs 1,000 crore annually expected to pay about 80% of collections
- Merchants processing above Rs 1 crore annually expected to pay another 10%
- 5% of MDR collections earmarked for small-merchant expansion
- PhonePe plans 20,000 frontline hires and 50 lakh payment devices in 12 months
- Pine Labs plans 10 lakh soundboxes
Why this matters
Payments and retail-tech buyers should prioritize partnerships or acquisitions that add merchant acquiring, device distribution, and large-enterprise UPI acceptance capabilities.
What to watch
- Formal NPCI circular specifying whether the MDR is mandatory, the merchant categories covered, effective date and treatment of taxes.
- Government and RBI response, especially any commitment to continue subsidizing UPI infrastructure instead of shifting costs to merchants.
- Merchant association statements and litigation or lobbying from organized retail, e-commerce, travel and electronics chains.
- UPI transaction-value mix above Rs 2,000 and any post-policy slowdown in high-ticket P2M payment volumes.
- PhonePe, Pine Labs, Paytm, BharatPe and bank-acquirer announcements on device targets, frontline hiring, enterprise partnerships and merchant pricing.
- Evidence of card, net-banking or pay-later share gains in high-value retail categories.
- Large retailers renegotiate acquiring contracts, seeking capped MDR, volume rebates and bundled device/service agreements.
- Payment platforms prioritize enterprise sales hiring, field-service networks and deployments of Soundboxes, SmartPOS terminals and reconciliation tools.
- Retailers add checkout nudges for lower-cost payment methods on high-ticket purchases, including card offers, bank-transfer options and private-label financing.
- Acquirers package MDR with value-added services such as settlement analytics, fraud controls, loyalty integration, invoice reconciliation and credit.
- E-commerce and omnichannel merchants reassess UPI incentives and may reduce cashback funding on transaction values above the threshold.