Proposed UPI MDR on high-value merchant payments could reshape retailer payment costs
A proposed Payments and Settlement Systems amendment could allow MDR on UPI merchant transactions above ₹2,000 while preserving free P2P and small-merchant payments. Large e-commerce sellers including Amazon and Flipkart could face added acceptance costs, while banks and payment platforms gain a new revenue pool.
What happened
A proposed Indian bill could permit MDR on high-value UPI merchant payments, while retaining free P2P and small-merchant transactions. It may raise costs for
Key facts
- MDR may apply to UPI transactions above ₹2,000
- Potential turnover thresholds cited: ₹1.5 crore or ₹150 crore
- SBI potential annual benefit: ₹3,000 crore
- Bank of Baroda and HDFC Bank potential benefit: around ₹800 crore
- Union Bank and Punjab National Bank potential benefit: around ₹700 crore
- PhonePe and Paytm potential annual benefit: roughly ₹700 crore each
- Google Pay potential annual benefit: around ₹500 crore
- Estimated UPI MDR market by FY2027-28: ₹5,000-₹10,000 crore
- Potential MDR rate: 15-30 bps
Why this matters
Retailers and platforms should assess strategic partnerships, routing arrangements and merchant-acquiring alternatives ahead of any shift from zero-MDR UPI on higher-value transactions.
What to watch
- Publication of amendment text, consultation papers and final definition of eligible merchant transactions.
- MDR cap, threshold level, merchant turnover exemptions and whether the fee applies to the full transaction value or only the amount above ₹2,000.
- Treatment of QR-based UPI versus intent, collect, autopay and credit-on-UPI transactions.
- Statements from RBI, NPCI, Ministry of Finance and major bank/acquirer associations on implementation and interchange allocation.
- Any change in UPI incentive subsidies, which could signal a transition from public support to merchant-funded economics.
- Large-platform checkout changes, seller-fee revisions or explicit UPI surcharges by airlines, electronics retailers, marketplaces and travel platforms.
- UPI transaction mix data showing the share of merchant payment value and volume above the proposed threshold.
- Model blended payment-cost exposure by UPI ticket size, merchant entity and category; prioritize businesses with high shares of orders above ₹2,000.
- Negotiate acquiring and payment-gateway contracts before any rule change, seeking MDR caps, volume rebates and co-funded consumer offers.
- Increase checkout steering toward lower-cost instruments where permitted, including prepaid balances, bank-linked offers, store credit and installment products.
- Reassess free-shipping thresholds, minimum-order values and promotional funding because an MDR can make high-AOV discounted transactions less profitable.
- Prepare seller-marketplace fee scenarios: marketplaces may seek to pass costs to third-party sellers, which could pressure seller economics and assortment breadth.
- Track whether payment platforms trade lower headline MDR for deeper retailer data, advertising, lending or loyalty partnerships.