UPI merchant fee from Oct. 15 could squeeze festive-season retail promotions
A 0.4% MDR on UPI merchant payments above ₹2,000, capped at ₹300 per transaction, could prompt retailers to trim discounts or absorb payment costs during the festive season. Smaller merchant payments and person-to-person transfers remain unaffected.
What happened
Unified Payments Interface (UPI) · India will impose a 0.4% MDR, capped at ₹300, on UPI merchant payments above ₹2,000 from October 15. Retailers may reduce
Key facts
- 0.4% MDR on UPI person-to-merchant transactions above ₹2,000
- ₹300 maximum fee per transaction
- ₹75,000 transaction threshold for fee cap
- P2P transfers represent 37% of UPI volume and 70% of value
- Transactions up to ₹2,000 account for more than 95% of P2M volume
What changed
India will impose a 0.4% MDR, capped at ₹300, on UPI merchant payments above ₹2,000 from October 15. Retailers may reduce discounts or adjust pricing to absorb costs, while P2P and smaller merchant transactions remain free.
Why this matters
Retailers should model the capped 0.4% UPI MDR on payments above ₹2,000 into festive checkout economics, balancing margin protection against the risk of weakening promotions.
What to watch
- Final government, NPCI, RBI, and acquiring-bank notification language on applicability, exemptions, implementation date, and surcharge rules.
- UPI merchant transaction-value distribution above ₹2,000, especially in electronics, fashion, grocery bulk orders, beauty, and gifting.
- Festive-period changes in UPI conversion, cart abandonment, payment-method mix, average order value, and promotion redemption.
- Whether major marketplaces, quick-commerce platforms, and national chains publicly absorb the fee or revise checkout incentives.
- Acquirer and PSP pricing announcements, merchant communications, and evidence of payment-method steering.