NPCI’s proposed UPI MDR could spur bill-splitting and merchant-routing loopholes
A proposed 0.4% MDR on UPI merchant payments above Rs 2,000, effective October 15, 2026, may encourage retailers and customers to split transactions. With no reported daily repeat-payment cap, the framework could reshape checkout practices, merchant classification and payment acceptance strategies.
What happened
National Payments Corporation of India (NPCI) · NPCI’s planned 0.4% MDR on UPI merchant payments above Rs 2,000 may be avoided by splitting bills, as no daily
Key facts
- 0.4% MDR
- Rs 2,000 transaction threshold
- Rs 300 MDR cap
- Rs 75,000 cap threshold
- Rs 6,000 example bill
- Rs 24 MDR on Rs 6,000
- Rs 1 lakh monthly collections threshold
- 3 consecutive months
- Rs 5 concessional charge
- More than 95% of merchant-payment volumes
Why this matters
Payment platforms and retail acquirers should assess partnerships and product features that help merchants manage MDR exposure without enabling routing or classification arbitrage.
What to watch
- Final NPCI circular text, including definitions of merchant payment, eligible transaction value, implementation dates and exemptions.
- Whether repeated same-day payments to the same merchant are aggregated by payer, QR, outlet, merchant ID or corporate group.
- Issuer, PSP, acquirer and POS-provider guidance on split-payment handling and automated detection.
- Large retailers' checkout prompts, public payment policies and high-ticket-category tender mix after implementation.
- Regulatory commentary from RBI, Ministry of Finance and consumer-protection authorities on merchant surcharging or transaction splitting.
- Changes in UPI payment success rates, average ticket size, transactions per order and the share of sub-Rs 2,000 payments.
- Acquirer pricing actions, including minimum fees, platform charges or higher pricing for high-frequency merchant transactions.
- Model blended tender cost by basket size, category and store format, with explicit exposure for transactions above Rs 2,000.
- Audit POS capability to support customer-requested split tender, multiple UPI QR scans and clean invoice/reconciliation treatment without creating tax or return mismatches.
- Review merchant-category codes, franchise/entity structures and QR deployment to ensure classifications are accurate and cannot be construed as fee avoidance.
- Prepare payment-steering tests: loyalty incentives for lower-cost tenders, card/EMI offers for high-ticket baskets and transparent customer messaging.
- Renegotiate acquiring contracts for MDR pass-through terms, routing options, reporting granularity and protections against future rule changes.
- Track whether split payments raise checkout abandonment, cashier handling time, fraud/dispute rates or refund complexity enough to outweigh MDR savings.