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UPI Transactions Face Potential 10% Value Drop After October 15 MDR Rollout
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Storyboard•04-10-2026, 13:16
UPI Transactions Face Potential 10% Value Drop After October 15 MDR Rollout
- •UPI transaction value could decline by 10% and volumes by 4% after the new 0.4% merchant discount rate (MDR) takes effect on October 15 for payments above ’2,000, according to LocalCircles.
- •Surveys by LocalCircles indicate a large majority of users may shift away from UPI for payments over ’2,000 if merchants pass on the additional cost.
- •Only 14% of surveyed UPI users would continue using UPI and bear an additional charge, with cash (27%) and credit cards (26%) emerging as preferred alternatives.
- •Merchant sentiment also shows reluctance to absorb the MDR, with 41% unwilling to bear any charge and only 17% prepared to absorb the 0.4% MDR.
- •Payments above ’2,000 constitute 67% of merchant transaction value, highlighting the significant impact of the new MDR on high-value UPI transactions.
Key Questions Answered
A 0.4% merchant discount rate (MDR) will apply to eligible person-to-merchant UPI payments above ₹2,000 starting October 15, with the fee capped at ₹300 for transactions of ₹75,000 and above.
UPI payments up to ₹2,000, person-to-person transfers, and small merchants receiving up to ₹1 lakh a month through UPI QR codes remain fully exempt from the MDR charge.
According to LocalCircles surveys, only 14% of users would continue using UPI if charged, with 27% shifting to cash, 26% to credit cards, and 14% moving to debit cards for purchases above ₹2,000.
