UPI MDR of 0.4% on merchant payments above ₹2,000 starts October 15
India will charge merchants a 0.4% MDR on UPI person-to-merchant transactions above ₹2,000, capped at ₹300 for payments of ₹75,000 and above. Banks, payment aggregators, fintechs and retailers will need to update payment systems and assess the impact on acceptance costs.
What happened
National Payments Corporation of India (NPCI) · India will levy 0.4% MDR on merchant-paid UPI transactions above Rs 2,000, effective October 15, 2026. The
Key facts
- 0.4% MDR on P2M UPI transactions above Rs 2,000
- MDR capped at Rs 300 for transactions of Rs 75,000 and above
- UPI processed 2,450 crore transactions worth Rs 29.82 lakh crore in August
- More than 55 crore UPI users
- UPI holds 84% of India's digital-payment volume
- India accounts for 49% of global real-time payment volumes
Why this matters
Payments players should prioritize bank and merchant-acquiring partnerships that capture the new MDR pool, while retailers may seek lower-cost processing or loyalty-linked payment alternatives.
What to watch
- Official implementation circulars defining covered merchant categories, exemptions, GST treatment, reversals and treatment of split payments.
- Acquirer and payment-aggregator rate cards showing whether the full 0.4% is passed through or offset by incentives.
- UPI payment mix above ₹2,000, especially changes in average ticket size, transaction counts and fallback use of cards, BNPL or cash.
- Large marketplace, food-delivery, travel, electronics and retail-chain announcements on convenience fees, minimum basket thresholds or payment-method promotions.
- Consumer complaints or merchant-association lobbying that could prompt a cap revision, delayed enforcement or category-specific relief.
- RBI, NPCI and government commentary on enforcement, surcharge permissibility and market-conduct expectations.
- Model net payment acceptance cost by category, average order value band and store format, separating transactions below and above ₹2,000.
- Update POS, QR, payment-gateway and reconciliation logic before October 15, including treatment of capped MDR and refunds or partial reversals.
- Review merchant contracts with acquirers, banks and payment aggregators to establish who bears MDR, settlement timing and any additional GST or platform charges.
- Test compliant payment-steering options at checkout, such as card offers or wallet incentives, without degrading UPI conversion or creating consumer confusion.
- Build basket-level pricing scenarios for high-AOV categories and identify locations or merchant cohorts where absorbing the fee is uneconomic.
- Monitor transaction splitting and refund-repurchase behavior as potential margin leakage and fraud-control risks.