Only 17% of Merchants Willing to Pay 0.4% MDR on UPI Payments Above ₹2,000: Survey

It is unlikely that many merchants will be ready to accept the 0.4% merchant discount rate on UPI payments above ₹2,000 since, according to a survey by LocalCircles, 17% only of those merchants are open to paying the rate for such digital transactions. 

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According to the survey results, just 17% of the merchants or businesses were willing to pay an MDR of 0.4% on UPI transactions of over ₹2,000. The survey follows the government’s announcement regarding the charge becoming effective on October 15. 

The findings have been drawn from 32,000 plus responses received from 242 districts. Out of these, 48% belong to Tier-I districts, 33% to Tier-II districts, while the rest 19% belong to Tier-III and Tier-IV districts. 

41% unwilling to pay any MDR 

Resistance was strongest among merchants who did not want any additional payment-processing cost. 

When asked how much MDR they would be prepared to bear on UPI payments above ₹2,000, 41% said they would not accept any MDR at all. Another 9% of respondents said they did not accept UPI payments. 

Among merchants open to paying a fee, willingness varied considerably depending on the rate. 

Fifteen per cent were comfortable with a maximum MDR of 0.04%. Another 5% each chose limits of 0.1%, 0.2% and 0.5%, while 8% were prepared to bear as much as 0.25%. Around 12% said they could accept an MDR of up to 1%. 

The pattern shows a clear drop in acceptance as the charge moves higher. Half of those surveyed were prepared to bear at least 0.04%, while 35% were open to 0.1% or more. At 0.25% or above, that proportion fell to 25%. Only 17% remained willing once the MDR reached 0.4%. 

UPI payments up to ₹2,000 remain protected 

The government on September 14 barred banks and payment system providers from imposing charges on UPI transactions of up to ₹2,000. RuPay debit card payments within the same limit are also covered by the protection. 

Transactions above ₹2,000 sit outside that exemption, opening the way for an MDR on higher-value merchant payments. 

MDR is the fee a merchant pays to banks and payment companies for processing a digital transaction. 

Survey also points to customer sensitivity over charges 

The debate around merchant costs comes at a time when UPI is processing transactions at considerable scale. In August 2026 alone, the payment system handled 24.51 billion transactions worth ₹29.82 trillion. 

A separate LocalCircles survey cited in the report also examined what customers might do if merchants passed the MDR cost on to them. 

In that survey, 53% of UPI users said they would stop using the payment method for transactions above ₹3,000 if the charge were passed through. Among them, 27% said they would switch to credit cards, 14% preferred debit cards, while 12% would move to cash or bank transfers. 

The merchant survey, meanwhile, puts the gap between the proposed rate and businesses’ willingness to absorb it into perspective. While half of respondents were prepared to accept at least a small MDR, the share narrowed substantially as the rate increased, reaching 17% at the 0.4% level.