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UPI Payments Above Rs 2,000 Face New MDR Rules
A new proposed rule would charge some merchants a small fee when customers pay more than Rs 2,000 through UPI.
The fee would be 0.4% of the payment, with a maximum of Rs 300 for payments above Rs 75,000.
A Rs 6,000 payment could therefore create a Rs 24 merchant fee.
If the customer makes three separate payments of Rs 2,000, each payment could fall below the fee threshold.
However, this does not mean customers have a guaranteed right to split a bill.
A shop may require one payment for one invoice because multiple payments create extra accounting and fraud risks.
Repeated rapid payments could also trigger bank security systems or transaction limits.
Customers should not normally pay MDR because it is charged to merchants.
If a merchant adds an MDR surcharge, the customer can report it through the payment app, acquiring bank, or consumer complaint channels.
From October 15, 2026, eligible person-to-merchant UPI payments above Rs 2,000 are set to attract a 0.4% MDR.
Payments exceeding Rs 75,000 would have a maximum MDR of Rs 300 per transaction.
Splitting a Rs 6,000 bill into three Rs 2,000 payments could technically avoid MDR under the transaction-based framework.
The framework does not currently prohibit splitting, but merchants may require one payment per invoice.
MDR is a merchant-side cost, and merchants are prohibited from passing it on to customers.
- Who
- The National Payments Corporation of India, merchants, banks, payment processors, and UPI customers are affected.
- What
- A proposed MDR framework would charge 0.4% on eligible person-to-merchant UPI transactions above Rs 2,000, while payment splitting may technically avoid the threshold.
- Where
- The framework applies to eligible UPI merchant transactions in India.
- When
- The proposed changes are scheduled to begin on October 15, 2026.
- Why
- The MDR is intended to cover network, processing, and service costs for merchant digital payments.
Splitting May Be Technically Possible
Merchants May Require One Payment
Whether a Rs 6,000 bill can be split
Splitting May Be Technically Possible
Because MDR is currently assessed per individual eligible transaction, three Rs 2,000 payments could remain below the threshold and avoid the merchant-level fee.
Merchants May Require One Payment
A merchant does not have to accept several payments for one invoice and may require a single transaction for accounting, reconciliation, refund, customer-service, or fraud-control reasons.
Who should bear MDR
Splitting May Be Technically Possible
Customers should not pay an additional amount merely because a merchant incurs MDR; they can refuse and report an attempted surcharge.
Merchants May Require One Payment
Merchants bear the payment-acceptance cost, although they may set reasonable payment conditions, such as requiring one payment per invoice.
Key facts
- Effective date
- October 15, 2026
- MDR rate
- 0.4% for eligible person-to-merchant UPI transactions above Rs 2,000
- Maximum MDR
- Rs 300 per transaction for transactions exceeding Rs 75,000
- Rs 6,000 example
- A single eligible payment could attract Rs 24 in merchant-level MDR
- Payment splitting
- Three separate Rs 2,000 payments would be assessed individually under the transaction-based framework
- Consumer charges
- UPI transactions are described as free for consumers, and merchants are prohibited from passing MDR to customers
- Potential risks
- Repeated identical payments may trigger fraud controls, temporary blocks, or daily transaction limits
Quotes
Dharmender Jhamb
Partner at Grant Thornton Bharat
“Under the proposed framework, MDR applicability is assessed with reference to the value of an individual eligible UPI transaction. Accordingly, separate transactions of Rs 2,000 each would be evaluated independently. However, merchants may choose whether to permit payment fragmentation based on operational, reconciliation, customer experience, or risk-management considerations.”
financialexpress.com
“Currently, there is no official daily cap on such splits under National Payments Corporation of India guidelines. However, normal bank-to-bank UPI transfers remain completely free of charges. This splitting strategy is only relevant when using pre-funded wallets or cards at merchants who are subject to these merchant fees.”
financialexpress.com
Sources
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