UPI MDR may return for higher-value payments at large merchants
Proposed payment-law changes could allow merchant discount rates on UPI transactions above Rs 2,000 at larger businesses. No charges are in force yet: the government has not notified rates, merchant criteria or final thresholds, while small purchases and P2P transfers are expected to remain exempt.
What happened
Proposed payment-law changes could enable MDR on higher-value UPI payments to large merchants. Rates, thresholds and coverage remain undecided, but a Rs 2,000
Key facts
- Rs 2,000 proposed transaction threshold
- 0.25%-0.5% MDR rates under consideration
- 5-7 basis points previously reported
- Rs 15 million proposed merchant annual-turnover criterion
- 23.7 billion UPI transactions in July
- Rs 29.9 lakh crore UPI transaction value in July
- Rs 50 billion-Rs 100 billion estimated annual industry revenue
- 4% of transaction volumes and about 67%-70% of value above Rs 2,000
Why this matters
Payment, acquiring and merchant-services partners may gain a new monetization avenue in high-value UPI, making large-merchant economics and contract terms worth revisiting once final rules emerge.
What to watch
- Final payment-law text and ministry/RBI/NPCI notification specifying threshold, merchant-size definition, MDR cap, effective date, and exemptions.
- Whether merchant eligibility is based on turnover, GST registration, annual UPI volume, store count, or category.
- Treatment of online marketplaces, aggregators, franchisees, quick commerce, and payment aggregators.
- Allocation of MDR among issuer banks, acquirers, PSPs, TPAPs, and NPCI; any separate interchange or network fee changes.
- Evidence of wallet, card, BNPL, or EMI share gains in transactions above Rs 2,000.
- Large-retailer announcements on UPI discounts, checkout routing, minimum purchase thresholds, or payment-method incentives.
- Government commitments to subsidize UPI infrastructure or compensate banks, which could reduce the need for merchant-funded MDR.
- Model UPI acceptance-cost exposure by ticket size, store format, merchant entity, and payment-service-provider contract.
- Prepare checkout steering tests for high-value baskets: UPI, cards, BNPL/EMI, bank transfer, and retailer-linked payment options.
- Renegotiate PSP and acquiring agreements for MDR caps, pass-through terms, dispute costs, settlement speed, and transaction-routing flexibility.
- Review pricing, promotional funding, and loyalty economics for categories with high-value UPI usage such as electronics, appliances, jewellery, travel, and marketplace orders.
- Avoid customer surcharges before final rules; develop compliant contingency messaging and tender-routing logic instead.
- Track whether competitors use MDR as a rationale to reduce UPI-linked discounts or shift rewards toward proprietary payment instruments.