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India may allow MDR on UPI and other electronic payments outside a negative list
Our read
India is more likely to introduce a selective, tiered MDR framework than a blanket charge on all UPI payments, creating a new revenue pool in enterprise acceptance while preserving zero- or low-cost access for small merchants.
For operators
Prepare for potential UPI acceptance costs by modeling MDR exposure across transaction volumes, ticket sizes and any turnover-based exemptions before rules are notified.
Watch
Text of the proposed legislation and whether UPI is explicitly included, excluded, or left to later notification.
Ask next
The report,
India may introduce merchant discount rates for electronic payment modes outside a government-notified negative list, potentially including UPI. The change could reshape payment acceptance costs for merchants, while UPI monetisation options under consideration include transaction thresholds or turnover-linked fees.
Channel facts
From the report. Source details below
| Credit-card MDR is typically | about 1.5% |
|---|---|
| Debit-card MDR is | up to 0.9% |
| UPI investment costs have increased nearly 300% over the past | 12–24 months |
| UPI penetration opportunity estimated at | nearly 3x |
| Target penetration cited at | 90% |
Also in the report
- UPI processes nearly 23 billion transactions monthly
What it means for online and offline
Reassess partnerships and acquisition targets in UPI acceptance, merchant acquiring and payments infrastructure, where a new MDR regime could reshape unit economics and bargaining power.
Signals to track
- Definition and scope of the negative list, including treatment of RuPay, wallets, prepaid instruments, Aadhaar-enabled payments, and cross-border transactions.
- Any MDR cap, merchant-turnover threshold, transaction-value threshold, or sector-specific exemption.
- Budget allocations or subsidy mechanisms compensating banks and payment service providers for zero-MDR UPI processing.
- NPCI, RBI, Ministry of Finance, and DPIIT consultation papers, implementation dates, and industry guidance.
- Merchant-acquirer pricing changes, QR deactivation rates, cash-discount behavior, and shifts in UPI transaction growth after policy clarification.
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- Large retailer and e-commerce platform responses, especially attempts to steer customers toward preferred payment methods or negotiate direct acquiring rates.
Likely next moves
Our read of what comes next — analysis, not reported by the source.
- Model MDR exposure by merchant size, transaction ticket, payment rail, and category rather than assuming a uniform UPI fee.
- Prepare tiered acquiring and QR-acceptance pricing that preserves free or subsidized acceptance for micro-merchants while monetizing enterprise merchants.
- Renegotiate merchant contracts to include regulatory pass-through clauses, routing flexibility, and pricing-review provisions.
- Build merchant communications around total acceptance economics, including settlement speed, reconciliation, fraud reduction, and loyalty conversion, to limit cash reversion.
- Increase advocacy through industry bodies for turnover thresholds, low-ticket exemptions, capped MDR, and continued government support for public digital-payment infrastructure.
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- Track whether competitors use MDR as a reason to bundle value-added services such as credit, analytics, loyalty, and reconciliation.
The counter-case
The case against this reading — not reported by the source.
The signal may overstate the likelihood and impact of MDR on UPI. A legal power to levy charges is not a decision to do so, and any notification could preserve zero MDR for low-value transactions, small merchants, or UPI specifically. Policymakers may avoid broad fees because UPI’s adoption, merchant acceptance, and financial-inclusion gains depend heavily on free acceptance. Even where MDR is permitted, banks, PSPs, or government subsidies could absorb much of the cost rather than passing it through to merchants.
The source
Published
First seen