Trade body seeks rollback of proposed 0.4% UPI MDR on merchant payments above ₹2,000
The Chamber of Trade and Industry says the proposed fee, due to take effect October 15, could raise acceptance costs for traders and deter higher-value UPI payments. Merchants with monthly UPI QR receipts below ₹1 lakh would remain exempt.
What happened
Trade body CTI urged the government to roll back a proposed 0.4% MDR on UPI merchant payments above ₹2,000, warning of pressure on 6 crore traders and lower
Key facts
- 0.4% MDR on eligible person-to-merchant UPI payments above ₹2,000
- ₹300 maximum MDR per transaction
- ₹1 lakh monthly UPI QR receipt exemption threshold for small merchants
- 6 crore shopkeepers, traders and entrepreneurs cited as affected
- UPI processed 24,162 crore transactions worth about ₹314 lakh crore in FY2025-26
- Merchant payments accounted for about ₹198 lakh crore
- Transactions above ₹2,000 represented about 4% of transaction volume and ₹131 lakh crore in value
- CTI estimates UPI payments above ₹2,000 could decline by up to 50%
- ₹5 flat fee for essential-service transactions above ₹2,000
- 0.02% MDR for capital-markets transactions
- 18% GST on merchant fees to be considered
- 5% of MDR collections proposed for a small-merchant UPI promotion fund
Why this matters
Payments platforms and merchant acquirers could see renewed economics in higher-value UPI acceptance, making partnerships with large-format retailers and value-added payment services more strategically attractive.
What to watch
- Formal government, NPCI, RBI or finance-ministry notification confirming the October 15 effective date and legal authority for the charge.
- Details of the ₹1 lakh monthly QR-receipts exemption, including whether it is merchant-level, QR-level, entity-level, or based on prior-period receipts.
- Statements from major merchant associations, banks, PSPs, QR aggregators and consumer groups regarding a rollback or revised threshold.
- Large retailer announcements on absorbing fees, imposing convenience charges, minimum-ticket rules, or payment-method steering.
- UPI transaction mix changes: decline in tickets above ₹2,000, increased split payments, or migration toward cards and cash.
- Any compensating subsidy, interchange revision, or government commitment to fund UPI infrastructure costs.
- Model MDR exposure by merchant size, average UPI ticket, and share of transactions above ₹2,000; prioritize grocery, electronics, apparel, pharmacy and quick-commerce categories.
- Prepare checkout and merchant-communication options for surcharge absorption, price adjustment, payment steering, and transaction-cost reporting.
- Engage trade bodies and payment partners on a tiered MDR structure tied to merchant turnover rather than only monthly QR receipts.
- Review whether customers could split payments or shift to alternative rails, creating higher checkout friction and reconciliation costs.
- Negotiate acquiring-bank and PSP pricing early, since providers may use the policy change to reprice adjacent payment services even if the proposal is diluted.