UPI MDR of 0.4% on transactions above ₹2,000 from October 15: What you need to know

A 0.4% Merchant Discount Rate (MDR) will be introduced on Person-to-Merchant (P2M) UPI transactions above ₹2,000 from October 15, while payments of ₹75,000 and above will carry a maximum charge of ₹300 per transaction. The new framework is aimed at introducing a nominal charge for larger commercial UPI transactions while keeping smaller and everyday digital payments free. Transactions below ₹2,000 will continue to attract no MDR, including for established commercial merchants.

0.4% MDR above ₹2,000

Under the revised structure, P2M UPI transactions exceeding ₹2,000 will attract an MDR of 0.4%. However, the charge will be capped for high-value payments.

For transactions of ₹75,000 and above, the maximum MDR will be ₹300 per transaction. This means a payment of ₹1 lakh, which would otherwise attract a 0.4% charge of ₹400, will instead incur only ₹300.

The cap is intended to make the cost of high-value UPI transactions more predictable for businesses handling large payments.

How the new MDR will work

Under the revised framework, a P2M UPI transaction above ₹2,000 will attract an MDR of 0.4%. For example, a ₹3,000 transaction will result in an MDR of ₹12, payable by the merchant to its acquiring bank. Similarly, a ₹50,000 payment will attract a charge of ₹200.

For transactions of ₹75,000 and above, however, the percentage-based calculation will be replaced by the fixed maximum cap of ₹300. Therefore, a ₹1 lakh transaction would otherwise attract ₹400 at 0.4%, but the merchant will pay only ₹300.

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The structure can be summarised as follows:

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Small merchants remain protected

The introduction of MDR above ₹2,000 does not automatically mean that every merchant receiving a payment above the threshold will be charged.

MDR applicability will depend on the overall categorisation of the merchant account. Small merchants operating under exempted tiers, such as P2PM, will not incur MDR merely because they receive a payment exceeding ₹2,000.

Large commercial payments capped at ₹300

For established commercial entities, the 0.4% MDR is positioned as a relatively low-cost payment processing charge compared with alternatives such as credit cards and payment gateways.

At the same time, transactions below ₹2,000 will remain free even for established commercial merchants.

The ₹300 ceiling is designed to keep costs predictable for businesses handling large-value payments. For instance, whether a qualifying transaction is ₹1 lakh or higher, the MDR will not exceed ₹300.

The revised framework therefore creates a threshold-based MDR structure: everyday UPI payments remain free, while larger P2M transactions attract a nominal charge, with a fixed ceiling protecting merchants from steep costs on high-value payments.

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