UPI to charge merchants 0.4% on select payments above ₹2,000 under new MDR framework
NPCI’s MDR framework retains free consumer transfers and more than 95% of merchant-payment volumes, but adds a 0.4% charge on qualifying P2M transactions above ₹2,000. The proceeds are intended to support UPI infrastructure, security and capacity as volumes scale.
What happened
NPCI’s new UPI MDR framework will charge merchants 0.4% on qualifying P2M payments above ₹2,000, while retaining free consumer transfers and most smaller
Key facts
- 23.66 billion UPI transactions processed in July
- 0.4% MDR on P2M transactions above ₹2,000
- ₹300 MDR cap for transactions of ₹75,000 and above
- More than 95% of UPI P2M transactions by volume remain free
- UPI volumes projected to rise from 24 billion to 50 billion within two years
- 15-30% historical transaction failure rates during volume surges
- ₹660 crore in fraud losses prevented last year
- UPI international expansion to eight countries
Why this matters
Evaluate partnerships or acquisitions in UPI payment orchestration, fraud prevention and merchant-services platforms that can help enterprises manage higher-value transaction costs and compliance.
What to watch
- NPCI circular defining qualifying P2M transactions, effective date, merchant-category coverage, exclusions and whether the rate is capped.
- Government or RBI response on MDR subsidies, merchant relief, small-business exemptions and enforcement expectations.
- UPI payment-mix changes above ₹2,000, including shifts to credit cards, RuPay credit on UPI, EMIs, BNPL and bank transfers.
- Large retailer, marketplace and payment-aggregator announcements on surcharge absorption, merchant pricing or checkout routing.
- Acquirer/PSP repricing, incentive changes and merchant migration toward providers offering better high-ticket economics.
- Evidence of basket splitting, payment failures or conversion declines in high-value categories.
- Quantify exposure by transaction count and GMV above ₹2,000, separated by store, online and QR-led payment flows.
- Model gross-margin impact under absorb, partial pass-through and payment-steering cases; prioritize categories with thin margins and high UPI ticket sizes.
- Review PSP, acquirer and bank contracts for routing options, volume rebates, MDR caps and settlement-cost offsets.
- Prepare compliant checkout messaging and staff scripts that preserve consumer choice while offering lower-cost alternatives where permitted.
- Monitor whether competitors introduce UPI minimums, split-payment prompts, card/EMI offers or cash discounts before changing customer-facing policy.
- Increase fraud, outage and reconciliation readiness as MDR-funded infrastructure upgrades may coincide with stricter payment controls and higher transaction scrutiny.