Just 17% merchants willing to bear 0.4% UPI charges: Survey
What's the story
A survey conducted by LocalCircles has revealed that only 17% of merchants are willing to bear a Merchant Discount Rate (MDR) of 0.4% on Unified Payments Interface (UPI) transactions over ₹2,000. The findings come after the National Payments Corporation of India (NPCI) announced an MDR for eligible person-to-merchant (P2M) UPI transactions from October 15, 2026.
Survey insights
Survey findings on merchant willingness to absorb MDR
The survey, which covered 32,796 merchants and businesses across 242 districts, found that 41% of respondents were unwilling to bear any MDR.
Among those willing to accept charge, only 15% said they would accept MDR of up to 0.04%.
The willingness to bear higher MDRs decreased with the rate: 5% each were okay with up to 0.1%, 0.2%, and 0.5%, while 8% could bear up to a 0.25%, and another 12% were okay with a full 1%.
Financial impact
How much would a merchant pay under NPCI's new framework?
Under the NPCI's framework, a merchant receiving a ₹3,000 UPI payment would pay an MDR of ₹12 at a rate of 0.4%.
For larger transactions, such as one worth ₹50,000, the MDR would be ₹200.
However, for transactions worth ₹75,000 and above, the MDR is capped at ₹300.
It's important to note that this charge is paid by merchants and not directly charged from consumers.
Regulatory framework
Government announces zero charges for UPI transactions up to ₹2,000
On September 14, the government announced that UPI payments up to ₹2,000 would be free from direct or indirect charges by banks and payment system providers.
This decision laid the legal groundwork for charges on transactions exceeding this limit.
The move is a major shift from the zero-MDR policy that has been in place since 2020 for merchant payments on UPI.
Ecosystem support
NPCI says revenue from MDR will support UPI ecosystem
The NPCI has said that the revenue generated from the MDR will be used to support the UPI ecosystem, including infrastructure, cybersecurity, innovation, and customer service.
The payment operator has also clarified that this framework is meant to keep small-value everyday UPI transactions out of the charge.
This change comes as UPI continues to function at a massive scale with nearly 24.5 billion transactions in August 2026 alone.