NPCI’s new UPI MDR framework will levy merchant fees on select payments above ₹2,000 from October 2026
The framework sets a 0.4% MDR, capped at ₹300, for specified standard merchant UPI transactions above ₹2,000. Capital-market payments carry 0.02% MDR, while select utility, fuel, telecom, insurance and railway payments face a flat ₹5 fee. Consumers are not to be charged.
What happened
National Payments Corporation of India (NPCI) · NPCI’s new UPI MDR framework will charge merchants, not consumers, for select transactions above ₹2,000.
Key facts
- 0.4% MDR on specified standard P2M UPI merchant transactions above ₹2,000
- ₹300 maximum MDR cap for transactions of ₹75,000 and above
- 0.02% MDR for specified capital-market transactions, capped at ₹300
- ₹5 flat MDR for railways, telecom, insurance, fuel and utility transactions above ₹2,000
- Zero MDR for specified category transactions below ₹2,000
Why this matters
Target payments, billing and merchant-software partners that can help enterprises optimize UPI routing, reconciliation and fee management as MDR creates a clearer monetization layer for select high-value transactions.
What to watch
- NPCI circular defining the exact merchant categories, transaction exclusions, implementation mechanics and fee-sharing arrangement among issuer, acquirer and intermediary.
- Whether MDR applies to all standard merchant UPI rails or only specified transaction modes, QR types, account categories or use cases.
- RBI, government or consumer-protection guidance on merchant steering, convenience fees, discounts by tender type and disclosure requirements.
- Payment aggregators' announced enterprise pricing, rebates and minimum-volume thresholds.
- Post-launch changes in UPI share for transactions above ₹2,000, especially electronics, travel, department stores and bill payments.
- Merchant attempts to split invoices or reroute transactions below the threshold, and any NPCI anti-circumvention enforcement.
- Competitive response from card networks and banks through lower MDR, installment offers, rewards and commercial-card propositions.
- Map UPI payment mix by ticket size and merchant category; isolate exposure above ₹2,000 and in designated flat-fee categories.
- Reprice payment acceptance economics against cards, net banking, cash-on-delivery and direct account-transfer options, including fraud, settlement and conversion impacts.
- Negotiate MDR rebates, volume tiers and bundled POS/payment-gateway contracts before the October 2026 start date.
- Build compliant checkout routing and tender-prompt tests that encourage preferred payment methods without imposing consumer UPI charges.
- Review rewards, cashback and merchant-funded promotions, especially for utilities, fuel, telecom, insurance, rail and high-ticket discretionary purchases.
- Prepare customer and store-associate communications to prevent perceived UPI surcharges or checkout friction.