Proposed 0.4% UPI MDR on payments above ₹2,000 puts merchant costs in focus
A proposed 0.4% fee on UPI merchant payments above ₹2,000 could raise roughly ₹24,000 crore a year for infrastructure and fraud prevention. Smaller merchants and transactions up to ₹2,000 would remain exempt, but resistance could slow adoption for higher-value digital purchases.
What happened
A proposed 0.4% MDR on UPI merchant payments above ₹2,000 could generate about ₹24,000 crore annually for infrastructure and fraud prevention, but may face
Key facts
- 0.4% MDR on UPI merchant transactions above ₹2,000
- P2M payments up to ₹2,000 remain free
- Small merchants with monthly UPI receipts up to ₹1 lakh remain exempt
- Estimated annual fee revenue: roughly ₹24,000 crore
- 41% of 32,796 businesses across 242 districts would not absorb MDR
What changed
A proposed 0.4% MDR on UPI merchant payments above ₹2,000 could generate about ₹24,000 crore annually for infrastructure and fraud prevention, but may face merchant resistance and affect higher-value digital-payment adoption.
Why this matters
Retailers should model a 0.4% UPI cost on transactions above ₹2,000 and consider whether pricing, payment steering or margin controls are needed for higher-value baskets.
What to watch
- Formal government, NPCI, RBI or finance-ministry notification defining applicability, merchant categories, threshold calculation and effective date.
- Whether the 0.4% is borne by merchants alone, shared across ecosystem participants, capped per transaction, or eligible for tax/input treatment.
- Industry responses from large retail chains, payment aggregators, banks and merchant associations.
- Change in UPI transaction value growth above ₹2,000 relative to transaction-count growth and card-payment volumes.
- Evidence of merchant discounting, consumer surcharging, transaction splitting or increased cash-on-delivery usage.