NPCI FAQ flags proposed MDR on high-value UPI merchant payments from October 2026
The FAQ outlines a proposed 0.4% MDR on UPI merchant payments above ₹2,000, capped at ₹300, while retaining exemptions for smaller merchants. Large retailers and e-commerce platforms could face added acceptance costs if the framework is formally adopted.
What happened
NPCI FAQ outlines proposed UPI MDR: 0.4% on merchant payments above ₹2,000, capped at ₹300, while small P2PM merchants remain exempt. The policy would affect
Key facts
- 0.4% MDR on P2M UPI transactions above ₹2,000
- ₹300 MDR cap for transactions of ₹75,000 and above
- Zero MDR for P2PM merchants up to ₹1 lakh per month
- Flat ₹5 MDR above ₹2,000 for railways, telecom, insurance and fuel
- 0.02% MDR capped at ₹300 for capital-market transactions
- UPI annual operating cost estimated at ₹20,000 crore
- August 2026 UPI volume: 2,451 crore transactions worth ₹29.9 lakh crore
Why this matters
Payments providers with enterprise merchant exposure may gain a new monetization lever if the proposal advances, making merchant mix, UPI volume concentration, and regulatory alignment key diligence points.
What to watch
- Formal RBI, Ministry of Finance, NPCI or Gazette notification confirming authority, effective date and merchant scope.
- Publication of the final FAQ or operating circular clarifying whether the ₹2,000 threshold applies per transaction, per merchant, or by merchant category.
- Definition of 'small merchant' and whether platforms, franchisees, marketplace sellers and QR aggregators qualify for exemptions.
- Acquirer and payment-aggregator notices on MDR pass-through, settlement changes and merchant contract amendments.
- Industry lobbying from retail, e-commerce, fintech and banking groups; any government statement reaffirming zero-MDR UPI policy.
- Changes in UPI transaction mix, especially high-ticket share, and retailer decisions to reduce UPI-specific promotions.
- Evidence of category-specific carve-outs for fuel, utilities, government payments, education, healthcare, travel or essential goods.
- Model gross payment-volume exposure above ₹2,000 by merchant category, channel and ticket size; calculate the maximum annual cost at 0.4% with the ₹300 cap.
- Review payment-acquiring contracts to determine whether any MDR can be absorbed by acquirers, banks, payment aggregators or marketplace sellers rather than the retailer.
- Prepare checkout and promotion alternatives: shift incentives toward wallet, co-branded card, bank-funded UPI offers or lower-cost tender mixes without discouraging UPI conversion.
- For marketplaces, assess whether payment-cost changes can be incorporated into seller fees, commission structures or fulfillment pricing, subject to contractual and regulatory constraints.
- Join industry representations seeking clear definitions of exempt small merchants, treatment of aggregators/marketplaces, category exemptions, implementation timing and surcharge rules.
- Avoid booking a full cost impact until an RBI/government-backed circular, NPCI operating procedure and acquirer pricing guidance are issued.