RBI backs 0.4% MDR on UPI merchant payments above Rs 2,000
A proposed 0.4% merchant discount rate on P2M UPI payments above Rs 2,000 is set to take effect on October 15, 2026. Customer charges remain barred; merchant fees are capped at Rs 300 on transactions of Rs 75,000 or more.
What happened
Reserve Bank of India · RBI backed NPCI’s 0.4% MDR on merchant UPI payments above Rs 2,000, effective October 15, 2026. Customers remain exempt; transactions up
Key facts
- 0.4% MDR
- P2M UPI transactions above Rs 2,000
- Rs 75,000 transaction threshold
- Rs 300 MDR cap per transaction
- October 15, 2026
- More than 95% of P2M UPI transactions by volume
- 11 countries
Why this matters
Payment processors, acquirers, and merchant platforms may become more attractive partnership or acquisition targets as merchants seek tools to manage tiered UPI acceptance costs.
What to watch
- Final RBI or NPCI notification defining covered merchant categories, transaction-value calculation, exemptions and settlement responsibility.
- Clarification on whether the Rs 300 cap applies per transaction, per payment instruction or aggregated merchant settlement.
- Payment-aggregator and acquiring-bank fee cards, especially whether they add processing or platform fees on top of MDR.
- Merchant association responses and evidence of indirect payment steering at electronics, travel, healthcare, education and luxury retail checkouts.
- UPI share changes for transactions above Rs 2,000 relative to cards, net banking, EMI and account-to-account transfer products.
- Any legal, political or consumer-protection challenge to merchant pricing or alleged covert customer pass-through.
- Changes in incentive funding for UPI acceptance that offset MDR for small businesses or priority sectors.
- Segment UPI transaction volume by ticket size, merchant category and payment channel to quantify exposure above Rs 2,000.
- Reprice high-value checkout economics using a 40 bps gross MDR assumption and a Rs 300 per-transaction cap.
- Negotiate acquiring-bank and payment-aggregator commercial terms before the October 2026 effective date, including blended pricing and volume rebates.
- Test compliant payment steering through channel-specific offers, loyalty rewards, EMI placement and lower-cost rail incentives rather than explicit UPI surcharges.
- Review refund, partial-capture and split-payment workflows, since MDR treatment on reversals and multi-tender orders can materially affect realized cost.
- Prepare merchant communications framing UPI acceptance as continuing, while updating internal margin and promotional-funding rules for high-ticket orders.