Key Highlights:

  • NPCI's Dilip Asbe said around 75% of UPI merchants will remain unaffected by the new MDR since they've never recorded a transaction above Rs 2,000.
  • India has over 60 million unique UPI merchants, and most of them fall below the transaction threshold triggering MDR.
  • About 80% of the total MDR value is expected to come from merchants with annual GMV exceeding Rs 1,000 crore.
  • Asbe said larger merchants already familiar with card payment charges are unlikely to pass the MDR cost onto consumers.
  • Only around 10% of merchant value carries a real risk of the MDR being transferred to customers, he said.

Most Merchants to Remain Unaffected

Around three-fourths of India's digital payment-accepting merchants will remain unaffected by the newly introduced merchant discount rate (MDR) on Unified Payments Interface (UPI) transactions above Rs 2,000, as they have never recorded a transaction exceeding that amount, National Payments Corporation of India (NPCI) Managing Director and Chief Executive Officer Dilip Asbe said on Thursday.

The Scale of India's Merchant Base

Speaking at the SBI Banking and Economic Conclave, Asbe said India has more than 60 million merchants accepting digital payments, and nearly 75 per cent of them have not seen a single transaction above Rs 2,000. As a result, the MDR policy will have no impact on the majority of merchants.

Asbe's Statement on the Policy's Reach

"We have about 60 million unique UPI merchants, and 75 per cent of them have not seen a transaction above Rs 2,000. Therefore, the majority of merchants will not be impacted by the MDR," he stated, offering a clear quantitative basis for his broader reassurance to smaller merchants.

Where the MDR Burden Will Actually Fall

He explained that the bulk of the MDR burden will fall on larger businesses. According to Asbe, around 80 per cent of the total MDR value is expected to come from merchants generating more than Rs 1,000 crore in annual gross merchandise value (GMV). Of the remaining amount, nearly half will come from businesses with annual GMV exceeding Rs 1 crore, indicating that the MDR's financial impact is heavily concentrated among a relatively small subset of large-scale merchants.

Why Larger Merchants Are Less Likely to Pass on Costs

Asbe noted that most of these merchants already accept credit card payments and are familiar with similar transaction charges. Therefore, the industry does not expect them to pass on the additional cost to customers, drawing a comparison to how these businesses have historically absorbed card payment fees without significantly altering pricing for consumers.

A Direct Statement on Expected Behaviour

"A significant portion of MDR is expected to come from large businesses, most of which already accept card payments and pay MDR," Asbe noted, reinforcing his expectation that established payment infrastructure familiarity among larger merchants would limit the likelihood of costs being transferred downstream.

A Smaller Segment of Concern

He, however, acknowledged that a small segment accounting for about 10 per cent of merchant value could potentially attempt to transfer the MDR burden to consumers, offering a candid assessment that not all merchants are expected to behave identically in response to the new charges.

Efforts to Prevent Cost Pass-Through

Nevertheless, he said banks, payment aggregators, acquiring banks and NPCI would work to ensure that such charges are not passed on to customers, indicating that the broader payments ecosystem intends to take an active role in monitoring and discouraging this kind of cost transfer where it might otherwise occur.

Quantifying the Consumer Risk

"The real risk of a consumer getting charged is just 10 per cent of the overall value," Asbe said, framing the overall risk to ordinary UPI users as fairly limited given how concentrated the potential cost pass-through is expected to be.

Confidence in UPI's Continued Growth

The NPCI chief also expressed confidence that the new MDR framework would not significantly affect UPI transaction volumes or values, suggesting that despite the introduction of this new charge structure, the platform's overall growth trajectory and widespread adoption across India's digital payments landscape are expected to remain largely unaffected in the period ahead.