NPCI’s proposed UPI MDR could raise costs on merchant payments above ₹2,000
From October 15, 2026, NPCI’s proposed framework would levy 0.4% MDR on eligible UPI P2M transactions above ₹2,000, capped at ₹300. Small merchants with qualifying QR collections of up to ₹1 lakh a month would remain exempt, while P2P transfers would stay free.
What happened
National Payments Corporation of India (NPCI) · NPCI’s proposed UPI merchant-fee framework would apply 0.4% MDR to eligible P2M payments above Rs 2,000 from
Key facts
- 0.4% MDR on eligible UPI P2M payments above Rs 2,000
- MDR capped at Rs 300 per transaction above Rs 75,000
- Zero MDR for small merchants receiving up to Rs 1 lakh monthly via UPI QR codes
- 1% cashback example on a Rs 10,000 credit-card purchase
What changed
NPCI’s proposed UPI merchant-fee framework would apply 0.4% MDR to eligible P2M payments above Rs 2,000 from October 15, while P2P transfers and qualifying small-merchant QR collections remain free. Retailers may see higher acceptance costs on larger UPI transactions.
Why this matters
If adopted, the 0.4% MDR on eligible UPI merchant payments above ₹2,000 would require larger retailers to reassess checkout prompts, payment-mix incentives and margin exposure while preserving free UPI acceptance for qualifying small merchants.
What to watch
- Final NPCI circular, implementation guidance, and confirmation of the October 15, 2026 effective date.
- Definition of eligible P2M transactions, merchant classification, QR-collection threshold calculation, and treatment of aggregators and marketplaces.
- Whether MDR is borne by merchant, acquirer, PSP, bank, or partially subsidized through incentives.
- Regulatory stance on merchant surcharging, differential pricing, payment-method discounts, and transaction splitting.
- Large retailer and e-commerce platform responses, especially changes in high-ticket UPI checkout messaging.