Only 17% of merchants ready to bear 0.4% UPI MDR: Survey
New Delhi, Sep 16 (UNI) Only 17 per cent of merchants and businesses surveyed are willing to absorb a 0.4 per cent Merchant Discount Rate (MDR) on UPI transactions above Rs 2,000, indicating limited acceptance of the proposed charge among businesses, according to a LocalCircles survey.
The survey comes after the government announced that a 0.4 pc MDR would apply to certain UPI merchant transactions above Rs 2,000 from October 15, 2026. While the charge is levied within the merchant-payment ecosystem and not directly on consumers, the findings highlight concerns among businesses over the potential impact of the new cost.
LocalCircles collected more than 32,000 responses from merchants and businesses spread across 242 districts. Nearly half of the respondents, 48 pc, were from Tier-I districts, while 33pc belonged to Tier-II districts. The remaining 19pc were from Tier-III and Tier-IV districts. The survey found that 41pc of respondents would not be willing to bear any MDR on UPI payments above Rs 2,000. Another 9 pc said they did not accept UPI payments.
Among those willing to absorb some level of MDR, 15pc said they could accept a maximum charge of 0.04pc. Five per cent each were comfortable with rates of up to 0.1pc, 0.2pc and 0.5pc, while 8pc said they could bear up to 0.25pc. Around 12pc of respondents said they were willing to absorb MDR of up to 1pc.
The findings show that merchant acceptance declines as the MDR rate increases. While about half of the surveyed businesses were willing to bear at least 0.04pc, the share fell to around 35pc for a rate of 0.1pc or more. At 0.25pc or higher, only 25pc remained willing to absorb the charge. At the proposed 0.4pc rate, acceptance fell to 17pc. Under the government's framework, banks and payment system providers cannot levy charges on UPI transactions of up to Rs 2,000.
The exemption also covers RuPay debit card transactions. However, transactions above Rs 2,000 are outside this specific exemption, paving the way for MDR to be charged within the merchant-payment ecosystem. MDR is essentially the fee associated with processing a digital payment and is paid by the merchant to entities such as acquiring banks and payment service providers. It is different from a direct transaction fee charged to the consumer.
The issue could become important for consumers if businesses decide to pass the additional cost on to customers, even though the new framework does not allow MDR to be directly passed on. UPI remains one of India's most widely used digital payment systems. In August 2026, the platform processed 24.51 billion transactions with a combined value of Rs 29.82 trillion.
An earlier LocalCircles survey also indicated that consumers could change their payment behaviour if merchants imposed an additional charge. It found that 53 pc of UPI users would consider switching away from UPI for transactions above Rs 3,000 if MDR were passed on to them. Among those respondents, 27pc said they would opt for credit cards, 14pc for debit cards, while 12pc preferred cash or bank transfers.
