Proposed Payment Bill could revive MDR on large-value UPI merchant payments
Proposed changes to India’s payment law may enable merchant discount rates on select UPI transactions, with charges expected to focus on payments above ₹2,000. Such transactions account for a small share of UPI volumes but nearly 70% of transaction value, potentially opening a new revenue stream for banks and fintechs.
What happened
Proposed payment-law changes could allow MDR to return on select large-merchant UPI transactions, creating revenue for banks and fintechs. Analysts expect
Key facts
- 5-7 basis points
- ₹2,000
- 30-40 basis points
- ~4% of transaction volumes
- nearly 70% of transaction value
- ₹29.9 lakh crore
- 23.66 billion transactions
- January 2020
- July 16
Why this matters
Prioritise partnerships or acquisitions in merchant acquiring, payment orchestration and high-ticket commerce where renewed UPI economics could create defensible revenue pools.
What to watch
- Final text and parliamentary progress of the Payment and Settlement Systems (Amendment) Bill.
- A government notification specifying whether MDR is permitted, mandatory or capped, and its effective date.
- The transaction threshold, merchant-category exemptions, treatment of P2M versus P2P payments and whether QR, collect requests and intent flows are included.
- Any commitment to continue or revise government incentives reimbursing UPI payment providers.
- Merchant-body responses, especially from e-commerce, fuel, grocery, telecom, travel and other high-ticket sectors.
- Evidence of checkout steering, minimum purchase rules, UPI surcharge attempts or migration toward cards and account-to-account alternatives.
- NPCI, RBI and bank guidance on interchange allocation, acquirer compensation, settlement and consumer disclosure.
- Segment merchant portfolios by ticket size, UPI value concentration, merchant category and ability to pass payment costs into pricing.
- Model MDR revenue under multiple thresholds, rate caps, merchant exemptions and transaction-routing assumptions; do not use UPI volume share as the primary revenue proxy.
- Prepare merchant communications and pricing architecture that distinguish UPI acceptance, payment gateway services, reconciliation and value-added merchant software.
- Prioritise retention plans for large merchants likely to steer customers toward cards, bank transfers, cash or proprietary checkout options if UPI acceptance costs rise.
- Build routing, billing, dispute and settlement controls capable of applying charges only to eligible transactions once notification details are known.
- Assess competitive exposure for QR-first acquiring models versus banks and payment aggregators with stronger enterprise merchant relationships.