UPI MDR rollout adds fees to select merchant payments above ₹2,000
India’s revised UPI framework introduces a 0.4% MDR on specified merchant payments above ₹2,000 from October 15. Fuel, rail, insurance and utility transactions will carry a flat ₹5 fee, while NPCI says 96% of merchant transactions remain unaffected.
What happened
India’s new UPI framework imposes 0.4% MDR on specified merchant payments above ₹2,000, while fuel, rail, insurance and utility transactions face a flat ₹5 fee.
Key facts
- 0.4% MDR
- ₹2,000 threshold
- ₹5 flat MDR
- 96% of merchant transactions unaffected
- 4% of merchant transactions affected
- ₹1 lakh per month
Why this matters
Payments and commerce buyers should reassess targets’ UPI mix, average ticket sizes and exposure to covered merchant categories, as MDR-linked cost pressure may strengthen the case for diversified payment acceptance and fintech partnerships.
What to watch
- NPCI circulars clarifying covered merchant category codes, payer-versus-merchant fee liability and whether the ₹5 charge is additive or substitutive.
- Acquirer and payment-app implementation notices, including settlement timing, GST treatment and dispute/refund handling.
- Government or RBI response to merchant and consumer backlash ahead of the rollout date.
- High-value UPI authorization declines, checkout abandonment and migration to cards, cash, bank transfer or wallets after launch.
- Competitor fee policies in fuel, rail, insurance and utility categories, particularly whether major chains absorb the charge.
- Model category-level exposure using UPI transaction mix, average ticket size and the share of payments above ₹2,000.
- Decide a fee policy by category: absorb, pass through, cap, waive for loyalty members or steer to lower-cost tenders.
- Update checkout, receipts, customer-service scripts and merchant terms to make any surcharge transparent before October 15.
- Renegotiate acquiring and settlement arrangements; test whether processors can route eligible payments, identify exceptions and reconcile fees at transaction level.
- Monitor conversion and tender-switching in high-value baskets through controlled pilots before broad implementation.