NPCI to levy 0.4% MDR on select UPI merchant payments above ₹2,000
The reported October 15 framework would introduce payment-acceptance costs for larger retailers while keeping most UPI transactions and small-merchant QR payments exempt. It also directs a share of collections toward merchant adoption and UPI infrastructure.
What happened
National Payments Corporation of India (NPCI) · NPCI will introduce a 0.4% MDR on merchant UPI payments above ₹2,000, while protecting small merchants and
Key facts
- 0.4% MDR for standard P2M UPI transactions above ₹2,000
- ₹300 MDR cap for payments of ₹75,000 and above
- Zero MDR for small merchants receiving up to ₹1 lakh monthly through P2PM UPI QR codes
- 0.28% interchange fee to issuer banks
- 0.12% to payer PSPs
- 0.08% to app providers
- MDR applies to about 4% of merchant transactions; 96% remain unaffected
- ₹5 flat fee for railways, telecom, insurance and fuel payments above ₹2,000
- 0.02% MDR for capital-market transactions, capped at ₹300
- 5% of MDR collections allocated to small-merchant UPI adoption fund
- 24.51 billion August UPI transactions, up nearly 4% month-on-month
- ₹20,000 crore estimated annual UPI infrastructure, cybersecurity and operations cost
- Top two apps account for around 78% of UPI transactions
Why this matters
Payments, retail-tech and acquiring teams should assess partnerships or acquisitions that help merchants optimize UPI routing, acceptance costs, reconciliation and loyalty at higher transaction values.
What to watch
- Formal NPCI circular specifying applicability, effective date, merchant categories, transaction thresholds and exemptions.
- RBI or government clarification on merchant surcharging, customer disclosure and zero-MDR policy continuity.
- Whether MDR applies to all UPI funding sources or only specific account, wallet or credit-linked transaction types.
- Acquirer announcements on pricing, merchant migration requirements and settlement-fee changes.
- Large retail, e-commerce and quick-commerce responses, including changes to UPI promotions or payment-method steering.
- UPI transaction mix shifts above the ₹2,000 threshold and any measurable decline in high-value UPI checkout conversion.
- Model effective payment-cost exposure by transaction-value band, merchant entity, store format and online versus offline checkout.
- Review acquiring and payment-aggregator contracts for MDR pass-through clauses, volume tiers, settlement costs and routing flexibility.
- Assess whether high-ticket UPI transactions can be nudged toward lower-cost rails without reducing conversion or customer trust.
- Prepare compliant pricing, surcharge and promotion options for categories with high average order values.
- Engage industry bodies and payment partners on exemptions, implementation timing and use of collections for merchant acceptance infrastructure.