Proposed UPI MDR would add 0.4% merchant fee on P2M payments above ₹2,000
NPCI’s stated framework, due October 15, 2026, would keep consumer UPI free while charging merchants 0.4% on eligible P2M payments above ₹2,000, capped at ₹300. The move could affect high-value checkout routing, though the government says 96% of UPI merchant transactions by volume would remain unaffected.
What happened
NPCI’s stated UPI MDR framework would charge merchants 0.4% on eligible P2M payments above Rs 2,000, capped at Rs 300. Consumers remain uncharged, while
Key facts
- 0.4% MDR on eligible P2M UPI payments above Rs 2,000
- Rs 300 MDR cap for transactions over Rs 75,000
- UPI payments up to Rs 2,000 remain zero MDR
- Debit-card MDR capped at 0.90%
- Credit-card MDR typically 1.5%-2.5%
- Standard UPI transaction limit of Rs 1 lakh
- Government estimates 96% of UPI merchant transactions by volume unaffected
Why this matters
Evaluate partnerships or acquisitions in payment orchestration, routing, and merchant-finance platforms that can help retailers optimize high-value UPI versus card acceptance costs.
What to watch
- NPCI’s final October 15, 2026 framework, including eligibility definitions, merchant-category exclusions, implementation date, and whether the ₹300 cap applies per transaction.
- Government clarification on reimbursement, subsidy, tax treatment, or exemptions for small merchants and priority sectors.
- UPI transaction-value distribution: share of merchant GMV, not just transaction count, occurring above ₹2,000.
- Acquirer and PSP pricing announcements, particularly whether they pass through the full 0.4% or bundle it into blended merchant rates.
- Debit-card, credit-card, BNPL, and wallet counter-offers aimed at high-value retail checkout.
- Evidence of retailer steering via QR/POS flows, differential promotions, minimum-basket thresholds, or reduced UPI cashback.
- Consumer behavior changes in high-ticket categories, including checkout abandonment and shifts from UPI to card-based EMI.
- Model effective MDR by basket size, category margin, store format, and payment mix; isolate transactions above ₹2,000 that would be eligible.
- Add tender-level margin rules to checkout design, especially for electronics, jewelry, appliances, travel, furniture, and large grocery baskets.
- Test compliant payment-mode steering through targeted offers rather than explicit UPI surcharges, including debit-card, BNPL, EMI, and private-label finance incentives.
- Renegotiate acquiring and payment-gateway contracts for blended pricing, high-value UPI routing, reconciliation, and dispute-service levels.
- Prepare merchant communications and POS training to prevent inconsistent cashier-led steering and customer friction.
- Reassess promotional economics: shift UPI-funded rewards toward transactions below the threshold or toward categories with sufficient margin headroom.