RuPay credit card-linked UPI payments exempt from new 0.4% MDR
India has clarified that RuPay credit card-linked UPI and pre-sanctioned credit-line transactions will remain exempt from the new merchant discount rate. From October 15, the 0.4% levy targets select direct bank-account-to-merchant UPI payments above ₹2,000, while small merchants retain zero MDR.
What happened
India clarified that RuPay credit card-linked UPI and pre-sanctioned credit-line payments are exempt from the new 0.4% MDR. The revised regime targets certain
Key facts
- 0.4% MDR on certain direct account-to-merchant UPI payments above ₹2,000
- ₹300 maximum MDR per transaction
- ₹5 flat MDR for certain railways, telecom, insurance and fuel payments above ₹2,000
- 0.02% MDR for capital-market UPI payments
- Around 4% of merchant transactions expected to be covered
- More than 95% of P2M UPI payments remain MDR-free
- 5% of MDR collections allocated to small-merchant acceptance fund
Why this matters
Payments partners with strong RuPay credit-card UPI and credit-line capabilities gain strategic value, since these rails remain exempt while selective high-value bank-account UPI payments face MDR.
What to watch
- Final NPCI, RBI, bank and acquirer circulars defining eligible merchant categories, transaction types and the exact direct-bank-account payment scope.
- Post-launch MDR line items in merchant settlement files and variance between acquirers or PSPs.
- Share of UPI GMV above ₹2,000 moving from bank-account UPI to RuPay credit-linked UPI or credit-line UPI.
- Issuer expansion of RuPay credit-card UPI issuance, transaction limits, rewards and customer eligibility.
- Merchant adoption of payment steering, checkout tender ordering or minimum-basket tactics among large chains.
- Any evidence that small-merchant zero-MDR status is narrowed, audited differently or subject to turnover-based reclassification.
- Consumer conversion and repeat-purchase changes if high-value UPI payment flows become more complex.
- Map UPI payment mix by ticket size, merchant entity, store format and rail type to isolate exposure to direct account-to-merchant payments above ₹2,000.
- Confirm acquirer and PSP classification logic before October 15, including treatment of split payments, refunds, recurring payments, QR flows and online checkout transactions.
- Add compliant tender-routing rules that prioritize exempt RuPay credit-linked UPI and other lower-cost accepted methods without degrading checkout conversion.
- Prepare finance reporting that separates incremental MDR from normal UPI processing costs and tracks any shift in authorization, basket size and tender mix.
- Negotiate with acquirers on pricing transparency, settlement reporting and protections against misclassification of exempt transactions.
- Avoid broad consumer-facing UPI surcharges; test targeted loyalty or payment-method incentives only where margin recovery exceeds discount and conversion costs.