Business EconomyPosted at: Oct 4 2026 12:01PM


Only 14pc UPI users willing to bear MDR on payments above Rs 2,000: Survey

New Delhi, Oct 4 (UNI) Only 14 per cent of UPI users surveyed are likely to continue using UPI for payments above Rs 2,000 if merchants pass on the 0.4 per cent Merchant Discount Rate (MDR) to customers, while a majority would shift to cash, cards or bank transfers, a LocalCircles survey has found.
The nationwide survey received more than 67,000 responses from UPI users across 291 districts of India, ahead of the October 15 rollout of MDR on person-to-merchant UPI payments above Rs 2,000.
According to the survey, 27 per cent of respondents said they would pay in cash if a merchant charged an additional fee for a UPI payment above Rs 2,000, while 26 per cent would switch to a credit card and 14 per cent to a debit card.
Another four per cent said they would use bank transfer, NEFT or IMPS, while nine per cent would ask the merchant for another payment option without an additional charge. Two per cent said they would avoid or delay the purchase.
Only 14 per cent said they would continue using UPI and bear the additional amount, while four per cent were undecided.
The findings indicate that if the MDR is passed on to consumers, more than eight in 10 surveyed users would shift to another payment mode or seek an option involving no or lower additional cost.
The 0.4 per cent MDR will come into effect from October 15 for person-to-merchant UPI payments above Rs 2,000, ending more than six-and-a-half years of zero MDR on UPI.
The government has maintained that the MDR should not be passed on to consumers. The Finance Ministry has clarified that MDR is neither a tax nor a charge collected by the government or NPCI, but is shared among banks, payment service providers and UPI apps for operating and expanding the payment network.
Banks have been directed to ensure that merchants do not pass the charge on to customers, while UPI apps have been barred from imposing platform fees or hidden charges.
Finance Ministry officials have said they will monitor the situation daily from October 15 to check whether merchants are passing the MDR to consumers. The Indian Banks' Association is also expected to work on a monitoring mechanism and conduct awareness campaigns in regional languages.
The issue assumes significance as high-value merchant payments account for a major share of UPI's transaction value.
UPI processed a record 24.51 billion transactions worth Rs 29.82 lakh crore in August 2026. Merchant payments accounted for 15.51 billion transactions worth Rs 8.95 lakh crore, with transactions above Rs 2,000 accounting for 67 per cent of the merchant payment value.
The LocalCircles survey also found that consumers could significantly alter their payment habits if UPI payments above Rs 2,000 involve an additional cost.
When asked which payment mode they expected to use most often going forward for purchases above Rs 2,000 if UPI became chargeable, 26 per cent chose credit cards and another 26 per cent chose cash.
Thirteen per cent opted for debit cards and 11 per cent for bank transfers, NEFT or IMPS. Only 20 per cent said they would continue using UPI most often, while four per cent could not say.
The survey therefore found that 76 per cent of UPI users surveyed expect to move larger payments away from UPI if an additional cost is imposed.
The survey findings also come against the backdrop of concerns among merchants over their ability and willingness to absorb the MDR.
In a separate LocalCircles survey conducted among businesses, only 17 per cent of merchants said they were willing to bear a 0.4 per cent MDR on UPI payments above Rs 2,000. Around 41 per cent said they would not bear any MDR, while nine per cent said they did not accept UPI payments.
Trader organisations have also opposed the proposed MDR, warning that the additional cost could encourage a shift towards cash or other payment modes.
The Confederation of All India Traders has warned that retailers could split bills, shift customers towards bank transfers or reprice goods. The Chamber of Trade and Industry has sought a rollback of the MDR, while trader representatives have also called for greater awareness before the rollout.
The government, however, has said around 96 per cent of merchant transactions will not be affected by the new framework.
UPI payments up to Rs 2,000 and RuPay debit card payments will remain protected from charges. The MDR will also be capped at Rs 300 per transaction for payments of Rs 75,000 and above.
A flat Rs 5 per transaction will apply to essential sectors such as railways, telecom, insurance, fuel and farm inputs, while capital market payments will attract an MDR of 0.02 per cent. Small merchants receiving up to Rs 1 lakh a month through UPI QR codes will also be exempt.
The survey noted that the introduction of MDR has been justified on the grounds of the cost of maintaining and expanding the UPI network. Government incentives for UPI had peaked at Rs 3,631 crore in FY2023-24, while Rs 2,000 crore has been allocated for FY2026-27.
The legal basis for the new framework came after Parliament amended Section 10A of the Payment and Settlement Systems Act, 2007, through the Taxation and Other Laws (Amendment) Bill, 2026. The Bill received Presidential assent on August 17.
LocalCircles has urged the government to make the ban on passing MDR to consumers enforceable, with clear penalties for merchants imposing surcharges or convenience fees on UPI payments.
It has also called for a simple mechanism for consumers to report such charges and seek refunds, along with close monitoring of sectors such as schools, hospitals, ticketing platforms, utility billers and government portals.
The survey received more than 67,000 responses from UPI users across 291 districts. Of the respondents, 63 per cent were men and 37 per cent women, while 45 per cent were from Tier-1 districts, 28 per cent from Tier-2 districts and 27 per cent from Tier-3, Tier-4 and Tier-5 districts. UNI SAS
Tags: #Only 14pc UPI users willing to bear MDR on payments above Rs 2#000: Survey
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