NPCI sets MDR framework for UPI merchant payments above ₹2,000
NPCI’s new framework proposes 0.4% MDR on qualifying UPI merchant payments above ₹2,000, capped at ₹300 for transactions of ₹75,000 or more. Small P2PM merchants and most low-value merchant payments remain exempt.
What happened
NPCI announced a UPI MDR framework charging 0.4% on larger merchant payments above ₹2,000, while retaining zero MDR for most transactions and small P2PM
Key facts
- 0.4% MDR on P2M UPI transactions above ₹2,000
- ₹300 MDR cap per transaction for transactions of ₹75,000 and above
- ₹5 flat MDR for qualifying essential and thin-margin sectors above ₹2,000
- 0.02% MDR for mutual funds, securities, stockbrokers and dealers, capped at ₹300
- Zero MDR for small P2PM merchants receiving up to ₹1 lakh per month through UPI QR codes
- Around 96% of merchant transactions remain MDR-free
- MDR expected to apply to around 4% of merchant transactions
- Dedicated fund equivalent to 5% of MDR collected
Why this matters
Payments platforms and retail-tech consolidators should prioritize acquiring, pricing, and reconciliation capabilities for large-ticket UPI flows, where new MDR pools could support partnership and M&A value.
What to watch
- Final NPCI circular, effective date and whether the framework remains a proposal or gains regulatory/government backing.
- Definition of qualifying merchant payments, including merchant category codes, online payment-gateway transactions, QR payments and enterprise collections.
- Confirmation of the ₹2,000 threshold, 0.4% rate, ₹300 cap and treatment of transactions near or above ₹75,000.
- Whether acquirers, banks or payment aggregators add markup, service fees or settlement charges beyond the stated MDR.
- Merchant-association response and any exemptions for priority sectors such as healthcare, education, fuel, utilities, government payments or small businesses.
- Changes in high-ticket UPI authorization success, average order value, payment-method mix and transaction splitting after rollout.
- Competitive response from card networks, BNPL providers, bank-transfer products and large marketplaces.
- Map UPI transaction volume, GMV and margin exposure by ticket band, category, store format and online versus offline channel.
- Model fee incidence under full absorption, selective price pass-through and tender-steering scenarios; prioritize categories with large average order values.
- Review payment-acquirer contracts, surcharge policies and checkout configurations to determine whether high-ticket UPI can be separately identified and routed.
- Prepare compliant customer incentives for alternate tenders, such as card-linked offers, EMI, bank-transfer discounts or loyalty rewards, without degrading UPI conversion.
- Engage payment partners and merchant associations on implementation dates, qualifying transaction definitions, settlement treatment and exclusions.
- Monitor split-payment behavior and establish fraud, reconciliation and cashier controls before customers begin attempting threshold avoidance.