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Sitharaman says any future UPI MDR would be levied on merchants, not users
Our read
India is likely to introduce a limited, tiered UPI MDR for large merchants rather than a universal charge, creating a new payment-cost line item that accelerates tender optimization at major retailers without directly charging consumers.
For operators
Large retailers should model a potential UPI MDR into payment-cost budgets and steer low-margin transactions toward the most economical acceptance mix, while awaiting legislation and NPCI guidance.
Watch
Passage, amendment or stalling of the Taxation and Other Laws (Amendment) Bill, 2026.
Ask next
The report,
Finance Minister Nirmala Sitharaman said any future UPI merchant discount rate would apply to merchants, not users. The government is considering MDR for large businesses, while small merchants, low-value payments and peer-to-peer transfers may remain exempt.
Channel facts
From the report. Source details below
| ₹2.86 lakh crore RBI surplus transfer in | 2025-26 |
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What it means for online and offline
Payments, acquiring and merchant-software buyers should assess partnership or acquisition targets positioned to help large merchants manage MDR pricing, routing and reconciliation if the proposal advances.
Signals to track
- Published definition of a 'large business,' including turnover, UPI GMV, store-level versus legal-entity treatment and marketplace treatment.
- MDR rate, transaction-value thresholds, category exemptions, annual caps and effective date.
- NPCI, RBI, bank and payment-aggregator consultation papers on merchant pricing and subsidy changes.
- Whether the government continues reimbursement/support for zero-MDR UPI acceptance among exempt merchants.
- Large retail, e-commerce, food-delivery and marketplace responses, especially payment-routing changes or pricing disclosures.
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- Changes in UPI share of checkout mix, high-ticket UPI usage and merchant migration toward cards, EMI, wallets or account-to-account alternatives.
Likely next moves
Our read of what comes next — analysis, not reported by the source.
- Model UPI acceptance costs by merchant entity, annual UPI GMV, average ticket size, category and transaction mix versus cards, cash and wallets.
- Review payment-routing contracts with PSPs, acquiring banks and aggregators; seek volume-tiered pricing, MDR caps and the ability to reroute transactions.
- Prepare checkout experiments that preserve UPI convenience while evaluating incentives for lower-cost tender types, including retailer wallets, bank-account-linked options and loyalty-linked payments.
- Assess whether high-margin or high-ticket categories can absorb MDR without price changes; avoid explicit consumer UPI surcharges if prohibited or reputationally risky.
- Upgrade reconciliation and tender-level margin reporting so finance teams can distinguish exempt low-value UPI flows from chargeable transactions.
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- Engage industry associations and NPCI consultations on thresholds, merchant definitions, category exemptions, settlement economics and implementation lead time.
The counter-case
The case against this reading — not reported by the source.
A merchant-only UPI MDR is unlikely to remain merchant-only in economic effect: large retailers could recover the cost through higher prices, reduced discounts, minimum basket thresholds, or steering customers toward cards and private wallets. It could also weaken UPI acceptance incentives among organized merchants, fragment pricing, and create pressure to reclassify transactions or entities to qualify for exemptions. If the rate is material, it may reduce UPI’s low-cost ubiquity without generating enough revenue to meaningfully improve bank and PSP economics.