NPCI to introduce 0.4% MDR on eligible UPI merchant payments above Rs 2,000 from Oct 15
The charge will be capped at Rs 300, while consumer payments, most low-value P2M transactions and small merchants remain exempt. NPCI says the proceeds will support UPI infrastructure and merchant expansion.
What happened
NPCI will levy 0.4% MDR on eligible UPI merchant payments above Rs 2,000 from October 15, 2026, capped at Rs 300. Small merchants, consumer payments and most
Key facts
- 0.4% MDR on eligible UPI P2M payments above Rs 2,000
- Rs 300 MDR cap for transactions of Rs 75,000 and above
- October 15, 2026 implementation
- 95%+ of P2M transaction volume is Rs 2,000 or less
- Rs 1 lakh monthly inward UPI threshold for P2PM merchant classification over three consecutive months
- 0.02% MDR for capital-market transactions, capped at Rs 300
- Rs 5 flat MDR for selected essential-service payments above Rs 2,000
- 2,451 crore UPI transactions worth Rs 29.9 lakh crore in August 2026
Why this matters
Payments, acquiring and retail-tech players have an opening to bundle cost-optimised acceptance, reconciliation and loyalty solutions for merchants newly exposed to MDR on higher-value UPI transactions.
What to watch
- Final NPCI circular defining eligible merchant categories, transaction types, exemptions, fee incidence and treatment of refunds, split payments and recurring payments.
- Whether banks, acquirers and payment aggregators absorb part of the MDR or pass through the full 0.4% to merchants.
- Merchant association responses and any government, RBI or NPCI clarification on surcharging or payment-method steering.
- Change in UPI share for transactions above Rs 2,000 versus credit cards, net banking, cash and EMI after October 15.
- Evidence of merchants splitting invoices or encouraging multiple sub-Rs 2,000 payments, and any NPCI controls against such behaviour.
- Growth in premium-card rewards, EMI promotions and payment-aggregator offers targeted at high-ticket retail categories.
- Small-merchant eligibility thresholds and whether organised chains can use separate store-level entities to retain exemptions.
- Segment payment economics by average order value, UPI share and gross margin; identify stores, categories and merchant entities with the highest exposure above Rs 2,000.
- Review merchant agreements and checkout policies to determine whether surcharging, payment-method discounting or routing incentives are permitted and commercially viable.
- Negotiate with acquiring banks and payment aggregators for blended MDR, volume rebates, capped-fee treatment and lower-cost routing for high-value tickets.
- Test non-punitive checkout nudges for high-ticket purchases, including EMI, credit-card offers, account-to-account transfer and loyalty incentives, while monitoring conversion impact.
- Update category-level pricing and promotional models for jewellery, electronics, furniture, travel, healthcare and premium services where ticket sizes frequently cross the threshold.
- Prepare merchant and customer communications that avoid framing UPI as unavailable or penalised, preserving adoption while clarifying eligible payment options.