Proposed 0.4% UPI merchant fee above ₹2,000 would not be passed to consumers: Report
Government sources said a proposed 0.4% merchant discount rate on UPI payments above ₹2,000 would be absorbed by merchants, with proceeds supporting banks and payment ecosystem players. The proposal could generate up to ₹15,000 crore in first-year fee recovery, according to the report.
What happened
Government sources said the proposed 0.4% UPI merchant fee on transactions above Rs 2,000 will not be passed to consumers. Proceeds would go to banks and
Key facts
- 0.4% MDR on UPI transactions above Rs 2,000
- 10% of total UPI transaction value could face pass-through risk
- 18% GST on merchant fees
- Rs 15,000 crore potential first-year MDR recovery
Why this matters
Payments platforms and acquirers may gain partnership and monetization opportunities if the proposal advances, particularly in merchant segments with high-value UPI transaction volumes.
What to watch
- Formal Ministry of Finance, NPCI, RBI, or cabinet notification specifying threshold, rate, effective date, and merchant exemptions.
- Whether the fee is levied on all UPI merchant transactions or only P2M transactions above ₹2,000.
- Clarification on who collects the MDR and how proceeds are allocated among issuing banks, acquiring banks, TPAPs, PSPs, and NPCI.
- Trade-body and SME merchant reaction, especially demands for category exemptions or permission to offer payment-method discounts.
- Changes in UPI transaction-value mix, high-ticket transaction growth, card spend substitution, and merchant QR acceptance expansion.
- Payment-acquirer pricing changes, new enterprise UPI plans, or increased incentives for card/EMI routing.
- Model effective payment acceptance cost by average order value, UPI mix, merchant category, and transaction band above ₹2,000.
- Review checkout routing and payment-promotion rules; avoid explicit consumer surcharges while preparing compliant incentives for lower-cost tenders.
- Renegotiate acquiring and payment-gateway contracts for blended MDR, volume rebates, faster settlement, and UPI reconciliation support.
- Identify high-ticket categories where UPI is dominant and test whether card, EMI, BNPL, or pay-by-bank alternatives improve contribution margin without reducing conversion.
- Prepare merchant communications and P&L scenarios for a phased rollout, including whether supplier marketplace sellers bear fees or receive temporary support.