Overview
- The finance ministry confirmed a 0.4% merchant discount rate on person-to-merchant UPI transactions above Rs 2,000 that will take effect on October 15, 2026 and will exempt person-to-person transfers and certain small merchants.
- The framework limits liability with a Rs 300 cap for transactions of Rs 75,000 or more and flat Rs 5 fees for specified sectors such as fuel and telecom, and the levy will be shared among banks, payment apps and service providers.
- A LocalCircles survey projects UPI volumes could fall about 4% and the monthly value of affected transactions could drop nearly 10% as many users say they would shift larger payments to cash or cards if merchants pass on the fee.
- Retail groups and some thin-margin businesses warn the levy may force merchants to stop accepting UPI or raise prices, and at least one firm, Pneucons, has said it will disable UPI ahead of the rollout on October 10.
- Supporters and some analysts argue the MDR will generate roughly Rs 20,000 crore a year to fund security and innovation and make the system self-sustaining, but regulators and market watchers will need to monitor merchant classification and any indirect pass-through to consumers.