Only 17% merchants willing to bear 0.4% MDR on UPI payments: Survey | Finance News

Only 17 per cent of merchants and businesses surveyed are willing to bear a merchant discount rate (MDR) of 0.4 per cent on Unified Payments Interface (UPI) transactions above ₹2,000, according to a LocalCircles survey.

 

The government on Tuesday announced to introduce a 0.4 per cent fee on UPI payments to merchants above ₹2,000, effective October 15.

 

The survey received over 32,000 responses from merchants and businesses across 242 districts. Of the respondents, 48 per cent were from Tier-I districts, 33 per cent from Tier-II, and 19 per cent from Tier-III and Tier-IV districts.

 

Most merchants unwilling to bear MDR

 

When asked about the maximum MDR they would be willing to bear on UPI payments above ₹2,000, 41 per cent of respondents said they would not bear any MDR charge. Another 9 per cent said they did not accept UPI payments.

  

Among the remaining respondents, 15 per cent said they would bear a maximum MDR of 0.04 per cent. Five per cent each were willing to bear up to 0.1 per cent, 0.2 per cent and 0.5 per cent, while 8 per cent were willing to pay up to 0.25 per cent. Around 12 per cent were willing to bear an MDR of up to 1 per cent.

 

Acceptance falls as MDR rises

 

Overall, half of the merchants surveyed were willing to bear an MDR of at least 0.04 per cent. However, acceptance declined sharply as the rate increased.

 

About 35 per cent were willing to bear an MDR of 0.1 per cent or more, while 25 per cent were open to a rate of 0.25 per cent or higher. At 0.4 per cent, the proportion dropped to 17 per cent.

 

UPI payments up to ₹2,000 protected

 

The government on September 14 barred banks and payment system providers from charging fees on UPI payments of up to ₹2,000. The same protection applies to RuPay debit card payments. Payments above ₹2,000 have been left outside the exemption, allowing for the possibility of an MDR on higher-value transactions.

 

MDR is the fee paid by a merchant to banks and payment companies for processing digital payments.

 

Consumers sensitive to additional charges

 

The survey comes as UPI continues to handle large transaction volumes. UPI processed 24.51 billion transactions worth ₹29.82 trillion in August 2026.

 

An earlier LocalCircles survey found that 53 per cent of UPI users would move away from the payment method for transactions above ₹3,000 if merchants passed on the MDR. Of these, 27 per cent said they would shift to credit cards, 14 per cent to debit cards, and 12 per cent to cash or bank transfers.