NPCI says 75% of merchants will remain outside proposed UPI MDR charges
NPCI says a 0.4% MDR on UPI merchant payments above Rs 2,000 would concentrate costs on larger businesses, while most merchants remain exempt. The proposed fee structure is positioned to fund payment infrastructure and a small-merchant support corpus.
What happened
NPCI says most Indian merchants will be unaffected by UPI MDR, with charges concentrated among large businesses. The framework is expected to fund
Key facts
- 75% of merchants have never recorded a UPI transaction above Rs 2,000
- MDR of 0.4% applies to P2M UPI transactions above Rs 2,000
- MDR capped at Rs 300 for transactions of Rs 75,000 and above
- Rs 13,000-15,000 crore projected first-year MDR revenue
- Rs 21,000 crore estimated annual UPI infrastructure cost
- 80% of MDR value expected from businesses with GMV above Rs 1,000 crore
- 90% of MDR value expected from businesses with GMV above Rs 1 crore
- 96% of UPI transaction volume and 75% of value remain outside MDR
- UPI value growth projected at 10% this year
- UPI volume growth projected at 15-17% this year
- Rs 3,000 crore small-merchant support corpus could be built over three years
Why this matters
Payments, acquiring and merchant-tech partners serving large retailers may gain monetization opportunities as UPI pricing differentiates high-value merchant acceptance from the small-business segment.
What to watch
- Formal NPCI, RBI or government notification specifying merchant eligibility, transaction threshold, effective date and MDR incidence.
- Whether the 0.4% fee applies only to transactions above Rs 2,000 or to the full transaction value once the threshold is crossed.
- Exemptions for essential categories, government-linked merchants, small businesses, marketplaces or specific merchant turnover bands.
- Payment aggregator announcements on enterprise MDR rebates, tiered pricing or revised UPI commercial terms.
- UPI mix shifts in high-average-order-value categories and changes in card, EMI and bank-transfer usage.
- Evidence that retailers raise minimum order values, add convenience charges indirectly, or offer tender-specific discounts.
- Model the gross-payment-volume exposure for UPI transactions above Rs 2,000, separated by merchant category, average order value and margin profile.
- Assess whether enterprise payment contracts permit pass-through, surcharge-like pricing, MDR sharing or rebates from banks and payment aggregators.
- Prepare checkout-routing tests that preserve UPI acceptance while promoting lower-cost tender types for high-ticket baskets.
- Monitor competitive pricing actions by large marketplaces, electronics retailers, grocery platforms and travel merchants; broad price pass-through would reduce relative disadvantage.
- Evaluate whether loyalty-linked bank payments, EMI, retailer wallets and closed-loop instruments become more attractive for high-value purchases.