UPI MDR returns on select ₹2,000+ merchant payments, but remains below card acceptance costs
A new UPI fee framework sets a 0.40% MDR on selected merchant payments above ₹2,000, capped at ₹300. Low-value transactions, small merchants and specified essential-sector and capital-market payments retain preferential or zero rates, preserving UPI’s cost edge over cards for most retailers.
What happened
UPI’s new 0.40% MDR on selected merchant payments above ₹2,000 remains below card fees, with a ₹300 cap on high-value transactions. Small merchants, low-value
Key facts
- 0.40% standard P2M UPI MDR for transactions above ₹2,000
- ₹300 UPI MDR cap for transactions of ₹75,000 or more
- 1.5–2.5% indicative credit-card MDR
- Up to 0.90% indicative debit-card MDR
- ₹5 flat MDR for eligible essential-sector UPI payments above ₹2,000
- 0.02% MDR for capital-market UPI payments
- 0% MDR for P2P UPI and P2M payments up to ₹2,000
- Zero MDR for eligible P2PM small merchants on inward receipts up to ₹1 lakh monthly
- Around 4% of UPI transactions by count may attract MDR
- 15–20% of UPI merchant GMV may be covered
Why this matters
Prioritize partnerships with UPI acquirers, PSPs and merchant-software providers that can help retailers route high-value transactions efficiently and manage the new fee rules.
What to watch
- Clarification of covered merchant categories, excluded essential sectors, and whether online, offline, and QR-based transactions are treated differently.
- Merchant surcharge rules and enforcement guidance from regulators and networks.
- UPI transaction-value distribution above ₹2,000 and changes in UPI share within high-ticket retail categories.
- Merchant discount rate revisions by major payment aggregators, banks, and large retail chains.
- Evidence of payment splitting, increased card usage, or bank-transfer adoption for eligible transactions.
- Further policy changes to zero-MDR support, subsidy arrangements, or the ₹300 fee cap.
- Large retailers review checkout routing and decide whether to absorb, surcharge, or steer eligible UPI transactions.
- Acquirers and payment aggregators update merchant pricing, MDR disclosures, and settlement reporting for transactions above ₹2,000.
- High-ticket categories test incentives for lower-cost payment methods and monitor customer conversion after any payment-method messaging.
- Fintechs position UPI acceptance as a lower-cost alternative to cards for merchants outside the newly charged transaction band.