UPI MDR proposal puts merchant costs in focus across 11 international markets
A proposed UPI merchant discount rate framework would begin in India on October 15, 2026, with charges on specified merchant transactions above ₹2,000. Whether the rules will extend to UPI’s 11 overseas acceptance markets remains unconfirmed.
What happened
UPI’s proposed merchant MDR framework may extend to its 11 international acceptance markets, though confirmation is pending. In India, specified merchant
Key facts
- UPI accepted in 11 countries
- MDR effective from October 15, 2026
- 0.4% MDR on specified merchant transactions above ₹2,000
- ₹300 maximum MDR per transaction for transactions of ₹75,000 and above
- ₹5 flat MDR for transactions above ₹2,000 in essential and thin-margin sectors
- 0.02% MDR for capital-market UPI payments, capped at ₹300
- Zero MDR for small merchants receiving up to ₹1 lakh monthly through UPI QR codes
- 5% of total MDR collections to fund small-merchant UPI adoption
Why this matters
Prioritize discussions with UPI acquirers, wallets and overseas acceptance partners to clarify MDR allocation and secure favorable cross-border merchant terms before any international rollout.
What to watch
- Final notification specifying MDR rate, merchant-category exclusions, threshold calculation and effective date.
- Clarification on whether international UPI acceptance transactions fall under the framework or under separate bilateral pricing.
- NPCI, NPCI International, RBI and partner-market guidance on interchange, acquiring fees, FX and settlement treatment.
- Merchant association responses, especially from large-format retail, travel, hospitality, fuel and e-commerce.
- Changes in UPI transaction mix around the ₹2,000 threshold, including basket splitting or migration to cards, cash or pay-later options.
- Announcements from overseas UPI partners on merchant onboarding fees or revised acceptance terms.
- Model UPI acceptance costs by transaction band, merchant category and market, with particular attention to baskets just above ₹2,000.
- Review payment-routing rules, surcharge policies and checkout messaging before any October 2026 effective date.
- Renegotiate acquiring and payment-aggregator contracts to separate domestic UPI, cross-border UPI, cards and wallet economics.
- Prepare targeted incentives for high-value UPI users rather than broad merchant-funded discounting.
- For international merchants, assess whether Indian tourist transaction volumes justify dedicated UPI acceptance if MDR and FX costs rise.