NPCI proposes 0.4% MDR on select UPI merchant payments above Rs 2,000
The proposed fee, effective October 15, would apply to specified merchant UPI transactions above Rs 2,000, while small merchants collecting up to Rs 1 lakh monthly via UPI QR codes remain exempt. The Finance Minister said the MDR is not a tax and will be borne by merchants.
What happened
National Payments Corporation of India (NPCI) · Finance Minister Nirmala Sitharaman said NPCI's proposed 0.4% MDR on select UPI merchant payments above Rs 2,000
Key facts
- 0.4% MDR on specified merchant UPI transactions above Rs 2,000
- MDR effective October 15
- Rs 300 MDR cap for transactions of Rs 75,000 or more
- Small merchants collecting up to Rs 1 lakh monthly via UPI QR codes exempt
- Approximately 96% of merchant transactions unaffected
What changed
Finance Minister Nirmala Sitharaman said NPCI's proposed 0.4% MDR on select UPI merchant payments above Rs 2,000 is not a tax and will be borne by merchants. Small merchants and most transactions remain exempt, with implementation from October 15.
Why this matters
Larger retailers should model the proposed 0.4% MDR on eligible UPI payments above Rs 2,000 into payment-cost and checkout strategy, while smaller QR-led merchants are largely shielded by the exemption.
What to watch
- Final NPCI circular language on covered merchant categories, transaction definitions, implementation date, and whether the 0.4% rate is capped.
- Government clarification on who legally bears the fee, whether customer surcharging is permitted, and whether subsidy support will offset MDR.
- Retailer and merchant-association responses, especially demands for broader exemptions or a lower threshold.
- UPI share changes for merchant payments above Rs 2,000 after implementation, alongside shifts toward cards and wallets.
- Acquirer and payment-aggregator pricing changes, including any additional platform fees or volume-based concessions.
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