Positive impactSector
UPI’s new MDR pot: 5% of collections to be used for bringing small merchants online
Economic Times 1 hr ago·20 Sept 2026, 6:35 am
NPCI announced that 5% of the merchant discount rate (MDR) collected on UPI transactions will be set aside in a dedicated fund. The fund is intended to help small merchants adopt digital payments, especially in tier‑2 and tier‑3 cities.
For merchants whose monthly turnover is below Rs 1 lakh, the MDR exemption will continue, while the new pool will be used to subsidise equipment, onboarding and training. This could increase the number of merchants accepting UPI, boosting transaction volumes and supporting the platform’s long‑term revenue model.
Investors should watch how quickly the fund is rolled out, the uptake by small merchants and any guidance from the regulator on eligibility criteria. The pace of merchant onboarding will indicate whether the initiative can deepen digital payments in rural markets.
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