UPI transaction value may drop 10% after Oct 15 MDR rollout: Survey

LocalCircles estimates UPI transaction volumes could fall 4% and value 10% as consumers shift to cards, cash and bank transfers if merchants pass on the MDR

Unified Payments Interface (UPI) transactions could see a 10 per cent decline in monthly value and a 4 per cent drop in monthly volumes if the proposed 0.4 per cent merchant discount rate (MDR) on payments above ₹2,000 takes effect from October 15, LocalCircles CEO Sachin Taparia said in a post on X.

 

The estimates are based on feedback from merchants and consumers collected through separate surveys conducted by LocalCircles ahead of the rollout.

 

A LocalCircles survey released on October 2 found that only 14 per cent of UPI users surveyed would continue making UPI payments above ₹2,000 and bear the additional amount if a merchant passed the MDR on to them. About 27 per cent said they would switch to cash, 26 per cent to credit cards and 14 per cent to debit cards.

 

 

The survey received more than 67,000 responses from UPI users across 291 districts. Overall, 76 per cent of the users surveyed expected to shift their larger payments to cards, cash or bank transfers if UPI involved an additional cost.

 

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

 

The government on September 14 protected UPI merchant payments of up to ₹2,000 and RuPay debit card payments from charges. The 0.4 per cent MDR on person-to-merchant (P2M) UPI payments above ₹2,000 is set to take effect from October 15. Small merchants receiving up to ₹1 lakh a month through UPI QR codes are exempt.

 

What merchants said about the UPI MDR

 

An earlier LocalCircles survey of merchants in August showed their resistance to bearing the proposed MDR. The survey found that 41 per cent merchants were unwilling to bear any MDR on UPI transactions above ₹2,000, while only 17 per cent were willing to bear a 0.4 per cent MDR.

 

Another 9 per cent of respondents said they did not accept UPI payments. Fifteen per cent said the maximum MDR they were willing to bear was 0.04 per cent.

 

How large are UPI merchant transactions?

 

UPI processed 24.51 billion transactions worth ₹29.82 trillion in August 2026. Of these, merchant payments accounted for 15.51 billion transactions worth ₹8.95 trillion. Payments above ₹2,000 accounted for 67 per cent of the value of merchant transactions.

 

The government has maintained that consumers should not bear the MDR. Finance Minister Nirmala Sitharaman said on September 22 that the responsibility did not lie with customers and that the charge would not be transferred to them.

 

The government is also working with the Indian Banks' Association on a mechanism for banks to monitor merchants and ensure that the charge is not passed on to consumers.