UPI MDR proposal could reshape merchant-payment economics for banks
A reported MDR of up to 0.4% on UPI merchant payments above ₹2,000 could create a ₹270 billion annual revenue pool by FY28, with banks expected to capture the largest share. Retailers would face added acceptance costs if the measure is implemented.
What happened
Unified Payments Interface (UPI) · New UPI MDR charges on merchant payments above ₹2,000 could create a ₹270 billion annual revenue pool by FY28. Banks are
Key facts
- ₹270 billion ($2.8 billion) projected annual revenue pool by fiscal 2028
- Nearly ₹200 billion projected payments-ecosystem profits
- Banks projected to receive about 60%, or ₹120 billion, of profits
- UPI MDR of up to 0.4% on merchant transactions above ₹2,000
- ₹300 fee cap for transactions of ₹75,000 or more
What changed
New UPI MDR charges on merchant payments above ₹2,000 could create a ₹270 billion annual revenue pool by FY28. Banks are expected to receive the largest share, with SBI, Axis Bank and Yes Bank identified as key beneficiaries.
Why this matters
Prepare for higher payment-acceptance costs on UPI transactions above ₹2,000 and evaluate checkout, pricing, and tender-mix mitigations if MDR is introduced.
What to watch
- Official NPCI, RBI, Ministry of Finance, or parliamentary consultation language on UPI MDR, transaction thresholds, exemptions, and effective dates.
- Whether MDR applies to all merchants, only large merchants, or particular MCCs such as fuel, travel, electronics, and luxury retail.
- Clarification on who pays: merchant-funded MDR, government reimbursement, bank sharing formula, or customer surcharge restrictions.
- Merchant association responses and evidence of checkout steering, minimum-basket thresholds, or split-payment behavior.
- Changes in UPI average ticket size, high-value transaction growth, card spend substitution, and merchant acceptance expansion.