Archive · 17 Sep 2026
Proposed UPI MDR Raises Concerns for Low-Margin Businesses
Some businesses may soon have to pay a fee when customers use UPI for larger purchases.
The proposed fee is 0.4% for eligible merchant payments above ₹2,000, with a maximum charge of ₹300.
Payments below ₹2,000 would not face this fee under the framework described.
Small merchants receiving up to ₹1 lakh monthly through UPI QR would also be exempt.
Mamman, a director at MPC Pharma, said his company handles about ₹1 crore in UPI payments each day.
He estimated that the fee could cost the company about ₹1.2 crore each year.
He and Kanan Bahl said this could be difficult for businesses that earn only small profits.
The framework offers lower rates or special treatment for some industries, so the impact will differ between businesses.
Eligible person-to-merchant UPI payments above ₹2,000 may attract a 0.4% MDR, capped at ₹300.
MPC Pharma Director Mamman estimated the charge could cost his company about ₹40,000 daily, or approximately ₹1.2 crore annually.
Mamman said the company processes around ₹1 crore in UPI payments each day and may limit UPI acceptance for larger payments.
Kanan Bahl warned that the charges could significantly affect businesses operating on 2-3% margins.
Small merchants and sectors including railways, telecom, insurance, fuel, utilities and capital markets may receive exemptions or concessional rates.
- Who
- Low-margin merchants, including MPC Pharma, along with the National Payments Corporation of India and other affected payment participants.
- What
- A proposed or revised UPI merchant discount rate framework could impose charges on eligible person-to-merchant transactions above ₹2,000.
- When
- The article does not definitively specify the effective date; it references October 15 in a related headline without stating a year.
- Where
- Across businesses accepting UPI payments in India; the article does not name a specific location.
- Why
- The framework sets differentiated merchant charges for eligible UPI transactions, potentially increasing payment-processing costs for high-volume businesses.
Merchant Concerns
Framework Safeguards
Effect on low-margin businesses
Merchant Concerns
Kanan Bahl and Mamman said a 0.4% charge could significantly reduce profits for businesses earning 2-3% margins, with estimates ranging from roughly 11-20% of gross profit depending on the calculation.
Framework Safeguards
The framework differentiates rates by merchant category, transaction size and collection volume, meaning not every business would face the full 0.4% charge.
Continued UPI acceptance
Merchant Concerns
Mamman said MPC Pharma could consider limiting UPI acceptance for larger payments if the additional cost makes the payment method uneconomical.
Framework Safeguards
Transactions below ₹2,000, qualifying small merchants and specified sectors would remain exempt or receive lower charges, allowing continued UPI use in many cases.
- Proposed MDR
- 0.4% on eligible person-to-merchant UPI transactions above ₹2,000.
- Maximum charge
- ₹300 per eligible transaction.
- MPC Pharma estimate
- Approximately ₹40,000 per day and ₹1.2 crore per year.
- Company UPI volume
- Around ₹1 crore in UPI payments daily, according to Mamman.
- Small-merchant exemption
- Merchants receiving up to ₹1 lakh monthly through UPI QR would not pay MDR.
- Concessional sectors
- Railways, telecom, insurance, fuel and utilities would attract a flat ₹5 MDR above ₹2,000.
- Capital-market rate
- Mutual funds, brokers and securities transactions would attract 0.02% MDR, capped at ₹300.