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83% of merchants won't absorb 0.4% UPI MDR on payments above Rs 2,000 from October 15, LocalCircles survey finds
Our read
Expect the 0.4% fee to shift a meaningful share of larger payments off UPI, with a real chance regulators soften it before the damage reaches the survey's -10% value estimate.
For operators
With 83% of merchants unwilling to absorb the 0.4% MDR and the affected tickets above Rs 2,000 making up about 67% of payment value, decide before October 15 whether to absorb, surcharge or steer big-basket shoppers to cards or other rails, and model the margin hit on that exposed share.
Watch
Any NPCI or government circular that delays, narrows or clarifies the MDR before October 15
Ask next
The report,
LocalCircles estimates UPI transaction value could fall by 10% and volumes by 4% after the 0.4% MDR takes effect. Its consumer survey found 76% of users expect to shift larger payments away from UPI if it carries an additional cost.
- Merchants unwilling to absorb 0.4% MDR83%
- Merchants willing to absorb 0.4% MDR or more17%
Reported figures
From the report. Source details below
| Share of merchant payment value above Rs 2,000: | 67% |
|---|---|
| Merchants willing to absorb 0.4% MDR or more: | 17% |
| MDR cap per transaction for Rs 75,000 and above: | Rs 300 |
What to watch next
- First monthly UPI value and volume figures after October 15 versus the survey's -10% and -4%
- Reports of surcharge notices or cash-only discounts at merchants for payments above Rs 2,000
- Card issuers or networks reporting a jump in spend on tickets above Rs 2,000
- Retailer commentary on payment costs and checkout mix in the next earnings cycle
Likely next moves
Our read of what comes next — analysis, not reported by the source.
- Merchants are likely to pass the 0.4% on to customers through surcharges, cash discounts or minimum-purchase rules, since only 17% say they would absorb it.
- Consumers are likely to move larger payments to cards or other non-UPI methods, as 76% say they expect to do.
- Card issuers and networks may market to higher-ticket shoppers above Rs 2,000, trying to win payments that leave UPI.
- The regulator or NPCI may issue clarifications or adjust the threshold before or soon after October 15 if merchant pushback grows.
- Large-ticket retailers, where payments above Rs 2,000 are most of the mix, are likely to feel the cost first and may revise checkout pricing or payment-method incentives.