UPI MDR to apply on merchant payments above ₹2,000 from October 15
A 0.4% MDR will apply to eligible UPI merchant transactions above ₹2,000 from October 15, 2026. Former Infosys CFO Mohandas Pai says 96% of transactions will remain unaffected, while fee proceeds could support banks’ and fintechs’ payment infrastructure.
What happened
India will levy 0.4% MDR on eligible merchant UPI payments above ₹2,000 from October 15, 2026. Mohandas Pai says 96% of transactions remain exempt, while the
Key facts
- 0.4% MDR
- ₹2,000 threshold
- October 15, 2026
- 96% of transactions unaffected
- 70% P2P payments
- 24.5 billion August 2026 transactions
- ₹29.8 lakh crore August 2026 transaction value
- 50 billion projected transactions in two years
Why this matters
Payments platforms with strong merchant-acquiring capabilities may gain a new monetization lever in higher-value UPI flows, increasing the strategic value of bank and fintech partnerships.
What to watch
- Final government, NPCI and RBI circular defining eligible merchant categories, exemptions, tax treatment and surcharge rules.
- Merchant payment mix above and below ₹2,000 after October 15, including basket splitting and cash-on-delivery substitution.
- Changes in card, wallet, bank-transfer, EMI and BNPL conversion rates for orders above ₹2,000.
- Retailer and trade-body response, especially among electronics, jewellery, travel, pharmacies, marketplaces and B2B distributors.
- Evidence that MDR collections are earmarked for bank/fintech infrastructure, alongside UPI success-rate, latency, fraud and dispute-resolution metrics.
- Competitive PSP offers that subsidize MDR or bundle it with lending, loyalty, analytics or faster settlement.
- Model margin exposure by average order value: prioritize categories where a meaningful share of UPI merchant payments exceeds ₹2,000.
- Review checkout routing and payment messaging to avoid abrupt conversion loss at the threshold; test neutral default payment ordering versus targeted incentives.
- Renegotiate acquiring, gateway and PSP contracts, seeking MDR offsets through settlement speed, fraud tooling, reconciliation and value-added merchant services.
- Prepare merchant communication on applicability, transaction classification, refund handling and whether any customer-facing surcharge is legally and commercially viable.
- Track high-value UPI share separately from transaction count, since the reported 96% unaffected figure may mask substantial value exposure.