UPI to levy 0.4% MDR on eligible merchant payments above Rs 2,000 from Oct 15
The government will retain a 0.4% merchant discount rate on eligible UPI transactions above Rs 2,000 from October 15, 2026. Consumers and small-value payments will remain free, while the policy is intended to reduce reliance on roughly Rs 2,000 crore in annual government incentives.
What happened
Government will not roll back a 0.4% MDR on eligible UPI merchant transactions above Rs 2,000 from October 15, 2026. Consumers and small-value payments remain
Key facts
- 0.4% MDR
- Rs 2,000 transaction threshold
- October 15, 2026 effective date
- around Rs 2,000 crore annual government incentive support
- nearly six years of zero-MDR framework
What changed
Government will not roll back a 0.4% MDR on eligible UPI merchant transactions above Rs 2,000 from October 15, 2026. Consumers and small-value payments remain free; the measure aims to make UPI infrastructure financially sustainable.
Why this matters
Retailers should reassess checkout economics and payment-routing strategies ahead of the 0.4% MDR on eligible UPI transactions above Rs 2,000 from October 15, 2026, while preserving frictionless acceptance for smaller purchases.
What to watch
- Final notification defining 'eligible merchant payments,' merchant-category coverage, exemptions and whether the threshold applies per transaction, order or settlement.
- NPCI, RBI and acquiring-bank implementation guidance on MDR collection, GST treatment, refunds, split payments and dispute flows.
- Large retailers' payment-page changes, particularly in electronics, jewellery, travel, hospitals, education and B2B wholesale.
- Movement in UPI average ticket size, transaction clustering around Rs 2,000, and high-value UPI share after the effective date.
- Bank and wallet promotions that subsidise merchant MDR or steer customers toward cards, pay-later and account-to-account alternatives.