UPI merchant payments above ₹2,000 to face 0.4% MDR from October 15

A 0.4% merchant discount rate will apply to specified person-to-merchant UPI payments above ₹2,000, capped at ₹300. Small QR merchants collecting up to ₹1 lakh a month remain exempt; the Finance Minister says consumers will not bear the charge.

— Source publishedFri, 25 Sept, 2026, 13:21 IST·First seen Fri, 25 Sept, 2026, 13:27 IST·Source BL · Consumer & Economy

What happened

NPCI will levy 0.4% MDR on select merchant UPI payments above ₹2,000 from October 15. The Finance Minister said merchants, not consumers, will bear the charge;

Key facts

  • 0.4% MDR on specified person-to-merchant UPI transactions above ₹2,000
  • MDR capped at ₹300 for transactions of ₹75,000 or more
  • 40% of MDR to customer banks
  • 30% to payment gateways
  • 20% to UPI apps
  • 10% to sponsoring banks
  • ₹5 flat fee for essential-services transactions above ₹2,000
  • 0.02% rate for capital-markets transactions
  • Small merchants collecting up to ₹1 lakh monthly via UPI QR codes exempt
  • 5% of MDR collections allocated to a small-merchant UPI promotion fund
  • Approximately 96% of merchant transactions unaffected

Why this matters

Prioritize partnerships or acquisitions in merchant payment-routing, reconciliation and value-added services that can help larger merchants manage the new UPI acceptance cost.

What to watch

  • Formal notification defining 'specified' UPI person-to-merchant transactions, liable party, settlement mechanics, and category exclusions.
  • PSP, bank, and major app announcements on merchant pricing and whether fees are absorbed, passed through, or offset with incentives.
  • UPI share of transactions above ₹2,000 versus credit cards, debit cards, EMI, and net banking in electronics, fashion, travel, grocery, and marketplaces.
  • Merchant checkout changes such as tender-specific discounts, UPI transaction caps, split-payment prompts, or surcharges.
  • Evidence of transaction bunching just below ₹2,000 or unusual growth in multiple-payment orders.
  • Government clarification on consumer protection, small-merchant eligibility, and enforcement against fee pass-through.
  • Segment payment data by UPI ticket size, merchant format, category, and store versus online channel to quantify exposure above ₹2,000.
  • Renegotiate acquiring and PSP contracts, using transaction volume and the ₹300 cap to secure tiered pricing or fee-sharing arrangements.
  • Test compliant checkout messaging and offers that shift high-ticket purchases toward lower-cost tenders without degrading UPI conversion.
  • Review whether split-payment behavior, prepaid wallet use, pay-later adoption, or cash-on-delivery substitution rises after October 15.
  • Protect small-seller ecosystems by clearly identifying exempt QR merchants and preventing platforms from passing enterprise-level fees to micro-merchants.

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