RBI backs MDR for specified merchant UPI payments above ₹2,000 from October 2026
The RBI has supported merchant discount rates on specified person-to-merchant UPI transactions above ₹2,000, saying shared fees could help fund payment infrastructure and expand acceptance. P2P transfers and merchant UPI payments up to ₹2,000 will remain free under the framework effective October 15, 2026.
What happened
Reserve Bank of India (RBI) · RBI supports MDR on specified merchant UPI payments above ₹2,000, arguing that sharing fees across participants will fund payment
Key facts
- MDR applies to specified P2M UPI transactions above ₹2,000
- P2P UPI transactions remain free regardless of value
- Merchant UPI payments up to ₹2,000 remain free
- Framework effective October 15, 2026
Why this matters
Payment acquirers, banks and large merchants have a new incentive to pursue partnerships that lower MDR exposure and expand acceptance for high-ticket UPI payments.
What to watch
- Final RBI circular defining 'specified' merchant categories, applicable merchant types, MDR caps, tax treatment, and whether customer pass-through is allowed.
- Published interchange/acquirer/PSP fee split and any government subsidy, reimbursement, or incentive scheme.
- Merchant-acquirer pricing announcements and changes to QR, soundbox, POS, and checkout-provider commercial terms.
- Evidence of basket splitting, increased cash usage, card substitution, or P2P misuse around the ₹2,000 threshold.
- Competitive pricing moves by large chains and marketplaces, particularly whether they absorb fees or display payment surcharges.
- UPI transaction-volume growth, failure rates, dispute levels, and acceptance expansion after the October 15, 2026 effective date.
- Model MDR exposure by category, average order value, store format, and online versus offline checkout; isolate transactions just above ₹2,000.
- Review merchant terms, checkout disclosures, and state-level consumer rules before introducing any payment-specific fee or cash-discount program.
- Build payment steering tests: free UPI below ₹2,000, bank-funded installments, store-credit incentives, and card/EMI alternatives for higher baskets.
- Renegotiate acquiring and PSP contracts early, seeking tiered MDR, volume rebates, capped fees, settlement-speed commitments, and fraud-loss allocation.
- Adjust pricing and promotional architecture for high-AOV SKUs, especially electronics, appliances, travel, furniture, premium beauty, and marketplace sellers.
- Train store and customer-service teams to explain payment choices without creating friction or implying that P2P transfers can be used as a merchant-payment workaround.