UPI to charge merchants 0.4% on payments above Rs 2,000 from October 15
Consumers will continue to use UPI free of charge, while merchants will pay 0.4% MDR on P2M transactions above Rs 2,000, capped at Rs 300. NPCI will allocate 5% of MDR collections to support small-merchant adoption.
What happened
UPI will levy 0.4% merchant-paid MDR on P2M payments above Rs 2,000 from October 15, while consumers remain charge-free. NPCI will cap fees and direct 5% of MDR
Key facts
- 0.4% MDR on P2M UPI transactions above Rs 2,000
- MDR capped at Rs 300 for payments of Rs 75,000 and above
- Rs 5 flat MDR for railways, telecom, insurance and fuel transactions above Rs 2,000
- 0.02% MDR for capital-market payments, capped at Rs 300
- More than 95% of P2M transactions are Rs 2,000 or below
- 5% of MDR collections to fund small-merchant adoption
- UPI transaction value was Rs 29.8 lakh crore in August
- UPI operating cost estimated at Rs 20,000 crore annually
Why this matters
Payment platforms and acquirers should pursue merchant-service, lending, and acceptance partnerships that use MDR-funded economics to deepen relationships with larger-ticket sellers while supporting small-merchant adoption.
What to watch
- NPCI circular details defining covered transaction types, merchant categories, exemptions, GST treatment and enforcement rules.
- UPI P2M value and volume trends above Rs 2,000 after October 15 versus card and bank-transfer substitution.
- Evidence of merchant-funded discounts, explicit payment-method steering, bill splitting or minimum/maximum tender practices.
- MDR pass-through by payment aggregators and banks, including whether the full 0.4% reaches merchants.
- Retailer commentary on gross-margin impact in electronics, jewellery, apparel, pharmacy, travel and omnichannel businesses.
- Scale, eligibility rules and utilisation of the small-merchant support pool.
- Large retailers update POS logic to identify UPI transactions above Rs 2,000 and measure category-level margin exposure.
- Merchants test tender steering at high-ticket checkout, especially toward credit cards, debit cards, account-to-account transfers and EMI.
- Acquirers and payment aggregators revise merchant contracts, settlement reporting and surcharge/discount policy guidance.
- Independent merchants seek clarity on whether bill-splitting, payment-link collection and QR-based transfers are included in the P2M MDR scope.
- NPCI and ecosystem participants publicise the 5% small-merchant adoption allocation, likely prioritising QR deployment, onboarding incentives and acceptance infrastructure.