UPI MDR Explained: Women Leaders on Merchant & Consumer Impact

By: Ayushi Dutta, Senior Correspondent

For years, UPI has carried a rare promise in India's digital economy: instant payments without a visible cost to the consumer. That simplicity helped turn a payment infrastructure into a daily habit, from a Rs 50 roadside purchase to a high-value business transaction. Now, that model is entering a new phase.

From October 15, 2026, a Merchant Discount Rate (MDR) of 0.4% will apply to specified Person-to-Merchant (P2M) UPI transactions above Rs 2,000, subject to a maximum charge of Rs 300 per transaction. Peer-to-peer transactions will remain free, while payments up to Rs 2,000 and eligible small-merchant transactions will also remain outside the MDR framework. The government has said approximately 96% of P2M transactions will remain unaffected.

Importantly, MDR is not a government tax or revenue collection; it is distributed among participants in the payment ecosystem, including banks and payment application providers.

The change has nevertheless triggered an important industry conversation: Can UPI introduce a sustainable revenue model without weakening the affordability, trust and financial inclusion that made it successful?

For merchants, the question is about payment economics and margins. For consumers, it is about whether a cost that is formally imposed on merchants can eventually influence prices or payment behaviour. For banks and fintech companies, it is about funding the infrastructure, cybersecurity and innovation required to operate UPI at enormous scale.

Against this backdrop, Sneha Oberoi, CFO, Suzuki Motorcycle India; Shallu Arora, Chief Financial Officer, Sirca Paints India; Ridhi Doongursee, Co-founder, Lxme; Shruti Mehndroo, Partner - GCC Advisory and Managed Services, B.B. Mathur & Company; and Tapasya Barejaa, Senior Executive Vice President, CSB Bank Limited, shared insights with the Women Entrepreneurs Review team on the implications of UPI MDR for consumers, merchants, financial inclusion and the long-term sustainability of India's digital payments ecosystem. Let us see what they say.