Only 17% of merchants and businesses are prepared to absorb a 0.4% merchant discount rate (MDR) on Unified Payments Interface (UPI) transactions exceeding ₹2,000, according to a LocalCircles survey.
The survey gathered more than 32,000 responses from merchants across 242 districts, covering businesses from different parts of India. Around 48% of participants were from Tier-I districts, 33% from Tier-II areas and 19% from Tier-III and Tier-IV regions.
The findings come after the government announced that a 0.4% MDR would be introduced on eligible merchant UPI transactions above ₹2,000 from October 15.
Merchants cautious about MDR charges
The survey showed that a large section of merchants remain unwilling to bear additional payment costs. Around 41% respondents said they would not accept any MDR charge, while 9% said they did not use UPI payments.
Among those willing to pay a fee, only a smaller proportion accepted higher rates. About 15% said they would pay a maximum MDR of 0.04%, while 8% were comfortable with a charge of up to 0.25%. Only 17% supported an MDR of 0.4%.
The survey indicated that merchant acceptance reduced significantly as the MDR rate increased. While half of the respondents were willing to consider an MDR of at least 0.04%, only 35% accepted a rate of 0.1% or more.
Users may shift payment methods
The government has exempted UPI payments up to ₹2,000 and RuPay debit card transactions from charges. However, transactions above this limit may attract MDR under the new framework.
MDR refers to the fee paid by merchants to banks and payment service providers for processing digital payments.
UPI continues to see rapid adoption, processing 24.51 billion transactions worth ₹29.82 trillion in August 2026.
An earlier LocalCircles survey found that 53% of UPI users may consider shifting to other payment methods for transactions above ₹3,000 if merchants pass on MDR costs. Some users indicated they could move towards credit cards, debit cards, cash or bank transfers.
