Proposed payments-law changes could open UPI to merchant discount rates
India may permit MDR on select UPI payments, potentially targeting transactions above Rs 2,000 at merchants with annual turnover above Rs 15 million. Rates and applicability are not final, but a carve-out for larger merchants could create new revenue for payment processors.
What happened
Unified Payments Interface (UPI) · Proposed amendments to India’s payments law could enable MDR charges on UPI. Policymakers may target larger merchants and
Key facts
- 23.6 billion UPI transactions in July
- Rs 29.9 trillion UPI transaction value in July
- Proposed MDR of 0.3%-0.5%
- Transactions above Rs 2,000
- Merchant annual turnover above Rs 15 million
- Rs 50 billion-Rs 100 billion estimated annual industry revenue
- Transactions above Rs 2,000 represent 4% of volumes and 67% of transaction value
Why this matters
Payments platforms and acquirers should assess partnerships or acquisitions that deepen enterprise merchant acquiring, pricing, and value-added services before MDR-enabled UPI economics reshape the market.
What to watch
- Draft bill or ministry notification specifying transaction threshold, merchant turnover definition, exclusions and effective date.
- Confirmation of MDR cap, whether the rate is ad valorem or fixed, and whether GST applies to the fee.
- Final allocation of MDR among issuer, acquirer, PSP, NPCI-linked entities and government-supported components.
- RBI, NPCI, finance ministry or parliamentary statements reaffirming zero-cost UPI for consumers and small merchants.
- Large retailer, e-commerce, fuel, grocery, hospital, travel and quick-commerce responses on payment steering or checkout acceptance.
- Changes in government budget allocations or incentive schemes supporting UPI infrastructure and bank participation.
- Evidence of average UPI ticket growth among larger merchants, which would expand the addressable fee base even under a high threshold.
- Model payment acceptance cost exposure for merchants above Rs 15 million turnover, separating UPI ticket sizes above and below Rs 2,000.
- Prepare differentiated pricing and merchant-contract strategies for large enterprise accounts versus SMBs, avoiding a blanket UPI fee response before final rules.
- Assess whether MDR revenue would accrue primarily to acquirers, issuing banks, PSPs or network-linked participants under likely settlement designs.
- Identify merchant categories with high average order values, high UPI penetration and low card acceptance costs; these are the most likely early steering and surcharge risk areas.
- Build retention offers for large merchants, including bundled acquiring, reconciliation, fraud tools, loyalty and working-capital products that can offset incremental MDR.
- Monitor competitor messaging: processors that frame MDR as funding reliability, fraud controls and merchant services may gain enterprise share even if rates are capped.