NPCI to levy 0.4% MDR on select UPI merchant payments above ₹2,000 from Oct 2026
NPCI plans a 0.4% merchant discount rate on select P2M UPI payments above ₹2,000, capped at ₹300 for transactions of ₹75,000 or more. Payments up to ₹2,000 and eligible small P2PM merchants remain exempt, while railways, telecom, insurance and fuel face a flat ₹5 fee above the threshold.
What happened
NPCI will introduce a 0.4% MDR for select merchant UPI payments above Rs 2,000 from October 15, 2026, capped at Rs 300. Small transactions and eligible small
Key facts
- 0.4% MDR on select P2M UPI transactions above Rs 2,000
- MDR capped at Rs 300 per transaction for transactions of Rs 75,000 and above
- Zero MDR for UPI transactions up to Rs 2,000
- Small P2PM merchants receiving up to Rs 1 lakh monthly remain exempt
- Flat Rs 5 MDR above Rs 2,000 for railways, telecom, insurance and fuel
- Rs 3,000 transaction: Rs 12 MDR
- Rs 50,000 transaction: Rs 200 MDR
- More than 95% of UPI P2M transaction volume is below Rs 2,000
Why this matters
Prioritize payment-acquirer, bank and checkout partnerships that can reduce MDR exposure on larger UPI transactions or steer qualifying customers toward lower-cost tender options.
What to watch
- Final NPCI circular defining 'select' merchant categories, exemption eligibility, transaction aggregation rules and treatment of refunds, partial captures and split payments.
- RBI or government response on MDR, zero-MDR policy alignment, merchant pricing practices and consumer-protection constraints.
- Acquirer and payment-aggregator rate cards, especially whether enterprise merchants receive subsidies or bundled commercial offsets.
- UPI transaction mix shifts above ₹2,000, including increased split-ticket behavior and migration to RuPay credit on UPI, cards, NEFT/IMPS or BNPL.
- Competitive retailer actions: tender-linked discounts, reduced UPI promotions, minimum basket rules or incremental card/EMI offers.
- Consumer sentiment and checkout abandonment in high-ticket categories after any visible payment-cost pass-through.
- Model UPI acceptance cost by category, average order value and share of transactions above ₹2,000; prioritize electronics, jewellery, appliances, furniture, travel and omnichannel premium retail.
- Begin payment-tender steering tests for high-value baskets: card offers, EMI, account-to-account transfer, prepaid and co-branded financing, while preserving frictionless UPI for low-ticket checkout.
- Renegotiate acquiring and payment-aggregator contracts before implementation, seeking blended pricing, category exemptions, capped monthly exposure and settlement-linked rebates.
- Review checkout, POS and invoicing capabilities for compliant tender-level incentives or surcharges if permitted; avoid blunt measures that could reduce UPI conversion or invite consumer backlash.
- Reassess loyalty economics: targeted rewards for lower-cost tender types may become more economical than broad UPI-funded promotions on high-value orders.