Neutral impactEconomy
Charges, framework, dedicated fund — How MDR on UPI works for micro and small merchants, explained
Mint 1 hr ago·22 Sept 2026, 6:06 pm
From 15 October, the Reserve Bank of India will levy a 0.4 percent merchant discount rate (MDR) on person‑to‑merchant UPI payments that exceed ₹2,000. The fee applies only to transactions above that threshold and is aimed at creating a dedicated fund to support micro and small merchants, while also covering the cost of the UPI infrastructure.
For investors, the new charge could tighten margins for small retailers that rely heavily on digital payments, potentially slowing the growth of UPI transaction volumes in the lower‑value segment. Payment‑gateway firms and fintechs may see a shift in fee structures, and banks could experience modest changes in fee‑income streams.
Going forward, market participants will watch how merchants adapt—whether they pass the cost to customers, shift to cash, or negotiate lower rates. Any further regulatory tweaks or data on transaction‑volume impact will be key signals for the broader payments ecosystem.
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- Category: Economy.
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