UPI to levy 0.4% MDR on select merchant payments above ₹2,000 from Oct 15
Small merchants can remain outside the new UPI MDR framework if monthly inward QR collections stay at or below ₹1 lakh. Crossing that level for three consecutive months shifts merchants from P2PM to P2M treatment; GST registration and QR replacement are not required.
What happened
UPI will levy 0.4% MDR on select P2M payments above ₹2,000 from October 15, 2026. P2PM small merchants remain exempt if inward UPI QR collections stay at or
Key facts
- 0.4% MDR on applicable P2M transactions
- ₹2,000 transaction threshold
- ₹1 lakh monthly inward UPI-credit threshold
- Three consecutive months above ₹1 lakh triggers P2M-to-P2M transition
What changed
UPI will levy 0.4% MDR on select P2M payments above ₹2,000 from October 15, 2026. P2PM small merchants remain exempt if inward UPI QR collections stay at or below ₹1 lakh monthly; no GST registration or QR replacement is required.
Why this matters
Retailers should audit UPI transaction mix and monthly QR collections, as eligible merchant payments above ₹2,000 will incur a 0.4% MDR while smaller low-volume merchants can retain exemption status below the ₹1 lakh threshold.
What to watch
- Formal NPCI, RBI, or government notification specifying legal basis, covered merchant categories, exclusions, and enforcement mechanics.
- Whether merchants may pass MDR directly to consumers and whether surcharging is restricted by payment rail or consumer-protection rules.
- Definition of monthly inward QR collections, treatment of refunds, multiple QR codes, marketplaces, franchisees, and seasonal sales spikes.
- Reported shifts in UPI average ticket size, transaction counts above ₹2,000, cash usage, debit/credit card usage, and bank-transfer adoption after Oct. 15.
- Merchant-acquirer MDR renegotiations and whether large chains obtain materially lower effective rates than the stated 0.4%.