NPCI has no daily cap on repeated UPI payments to same merchant
From October 15, 2026, UPI payments above Rs 2,000 to large merchants will attract a 0.4% Merchant Discount Rate, capped at Rs 300 for transactions of Rs 75,000 or more. NPCI reportedly does not plan a separate daily limit on repeated payments to the same merchant. Industry executives told ET a Rs 6,000 bill split into three Rs 2,000 payments could avoid the Rs 24 charge. Over 95% of merchant-payment volumes stay free.
Source
Times of India — Top · read the original report ↗
Desk check · some claims need care
What the desk checked (5)
- From October 15, 2026, UPI payments above Rs 2,000 to large merchants attract 0.4% MDR, capped at Rs 300 for transactions of Rs 75,000 or more. — Figures appear in source, described as the NPCI framework; no document citation given.
- NPCI does not currently plan a separate daily limit on repeated UPI payments to the same merchant. — Reported ('reportedly') and supported by an unnamed person involved with NPCI quoted by the financial daily.
- A merchant could avoid a Rs 24 charge on a Rs 6,000 bill by taking three payments of Rs 2,000. — Attributed to an ET report and industry executives; arithmetic internally consistent with the 0.4% rate.
- P2PM merchants are shifted to the regular category if collections exceed Rs 1 lakh a month for three consecutive months. — Stated in source as existing bank/PSP practice; no source cited.
- Over 95% of merchant-payment volumes stay free, while transactions above Rs 2,000 are about two-thirds of merchant payment value. — Percentages attributed to the framework and unspecified industry estimates.
Analysts’ view opinion
This is the moment India's payments system stops being free at the margin for larger merchants, and the design detail matters more than the headline rate. A 0.4% MDR above Rs 2,000, capped at Rs 300, is modest in absolute terms, but because transactions above Rs 2,000 account for around two-thirds of merchant payment value, that thin slice sits on a very large base. The absence of a daily cap on repeated payments to the same merchant leaves an obvious behavioural escape route — splitting a Rs 6,000 bill into three Rs 2,000 payments — and NPCI's bet is that the friction of doing so is higher than the Rs 24 saved.
- The economics are asymmetric: over 95% of merchant payment volumes stay free, but the value concentrated above Rs 2,000 is where the revenue — and the incentive to avoid it — lives.
- For merchants the arithmetic is small per transaction yet continuous, so thin-margin retail is likeliest to push the cost onto customers through convenience fees or by nudging them toward split or cash payments.
- The Rs 300 cap on transactions of Rs 75,000 and above makes the charge regressive in effect — high-value sales pay a shrinking percentage, while mid-sized bills bear the full 0.4%.
- Enforcement cost, not the rate, is the real variable: the story flags unresolved questions on aggregating small-merchant collections across accounts, QR codes and providers, and policing that requires linking channels to one business.
- On the benefit side, NPCI has said the revenue funds UPI infrastructure, cybersecurity and customer service — a user-pays model replacing what has effectively been a subsidised public utility, which is defensible if service quality visibly improves.
What to watch — Watch whether merchant behaviour shifts in the first billing cycles after October 15, 2026 — splitting, channel-spreading or routing to personal IDs — and whether weaker-than-expected collections push NPCI toward the transaction-level limits it says it does not currently need.
The story does not establish how much revenue the MDR is expected to raise, how many merchants fall into the affected category, or whether costs will actually be passed to consumers; the workarounds are described by industry executives as possibilities, not measured practice, and NPCI's position is reported as current thinking that could change.
Deep dive
Research brief · 8 facts · 2 dates · exam-readyThe brief
Context
UPI merchant payments have so far been free of charges, with the government and NPCI keeping Merchant Discount Rate (MDR) at zero. Under a new NPCI framework effective October 15, 2026, UPI payments above Rs 2,000 to large merchants will attract an MDR of 0.4%, capped at Rs 300 for transactions of Rs 75,000 or more. NPCI reportedly does not plan a separate daily limit on repeated UPI payments to the same merchant, opening the possibility that merchants split larger bills into transactions of Rs 2,000 or less to stay within the free band. NPCI says MDR revenue will fund UPI infrastructure, cybersecurity and customer service.
Key facts
- From October 15, 2026, UPI payments above Rs 2,000 to large merchants will attract a Merchant Discount Rate of 0.4%.
- The MDR charge is capped at Rs 300 for transactions of Rs 75,000 or more.
- A single UPI payment of Rs 6,000 would attract an MDR of Rs 24; three payments of Rs 2,000 each would attract nothing.
- NPCI's framework and its FAQs do not stipulate that multiple payments relating to a single bill must be clubbed together.
- Small merchants in the zero-MDR person-to-person-merchant (P2PM) category are shifted to the regular merchant category if collections cross Rs 1 lakh a month for three consecutive months.
- Some merchant categories, including railways, telecom, insurance, fuel and utilities, are eligible for a concessional flat charge of Rs 5 instead of the 0.4% rate.
- More than 95% of merchant-payment volumes will continue to remain free under the framework.
- Industry estimates show transactions above Rs 2,000 account for around two-thirds of the total value of merchant payments.
Timeline
- Current position (as reported)NPCI does not plan a separate daily limit on repeated UPI payments to the same merchant, and does not think transaction-level limits are necessary.
- October 15, 2026New framework takes effect: 0.4% MDR on merchant UPI transactions above Rs 2,000, capped at Rs 300 for payments of Rs 75,000 or more.
Who has a stake
- NPCI (National Payments Corporation of India) — Owns the framework and expected MDR collections; must decide whether workarounds like bill-splitting warrant extra transaction-level rules.
- Large merchants — Face 0.4% MDR on payments above Rs 2,000 and may attempt splitting bills or routing receipts to avoid charges.
- Small merchants in P2PM category — Stay zero-MDR unless collections cross Rs 1 lakh a month for three consecutive months, after which they move to regular merchant charges.
- Banks and payment service providers — Track merchant collections, assign merchant category codes, and may reclassify accounts misusing personal UPI IDs.
- Customers — May be asked by merchants to make multiple smaller payments instead of one transaction.
- UPI infrastructure and cybersecurity systems — NPCI says MDR revenue will support UPI infrastructure, cybersecurity and customer service.
Why it matters
UPI's zero-cost model is being partially unwound, and how tightly the new charge is enforced will determine both merchant behaviour and the revenue available to fund the network's upkeep. Since transactions above Rs 2,000 make up roughly two-thirds of merchant payment value, widespread avoidance through bill-splitting or account-spreading could meaningfully dent expected collections. It also raises questions of fairness between compliant merchants and those exploiting gaps in classification rules.
UPSC angle
Prelims pointers
- MDR (Merchant Discount Rate) on UPI for large merchants: 0.4% on transactions above Rs 2,000 from October 15, 2026.
- MDR cap: Rs 300 for UPI transactions of Rs 75,000 or more.
- P2PM (person-to-person-merchant) category: zero MDR for small merchants; threshold is Rs 1 lakh monthly collections for three consecutive months.
- Concessional flat Rs 5 charge categories include railways, telecom, insurance, fuel and utilities.
- Over 95% of merchant-payment volumes remain free; above-Rs 2,000 transactions are about two-thirds of merchant payment value.
- Genuine recurring UPI AutoPay transactions are exempt from the new charges.
Mains framing
The reintroduction of MDR on high-value UPI merchant payments marks a shift from a fully subsidised digital-payments model to one where the network partly funds its own infrastructure, cybersecurity and customer service. But the design leaves gaps: with no daily cap on repeated payments to the same merchant and no requirement to club payments arising from a single bill, a Rs 6,000 bill can be split into three Rs 2,000 payments to escape a Rs 24 charge. Further gaps arise because the FAQs do not clarify whether P2PM collections must be aggregated across bank accounts, QR codes and payment service providers, allowing receipts to be spread below the Rs 1 lakh monthly threshold; other routes include directing business receipts to personal UPI IDs (where P2P transfers remain free) or claiming a concessional merchant category code or AutoPay exemption, both of which industry executives describe as breaches or misclassification. NPCI's stated position is that transaction-level restrictions are unnecessary and splitting will not persist at scale, but with above-Rs 2,000 payments accounting for about two-thirds of merchant payment value, the revenue risk is non-trivial. The way forward lies in clearer FAQ guidance on aggregation, linking accounts and QR codes to a single business identity, tighter onboarding checks on merchant category codes, and post-facto reclassification by banks and payment providers rather than blunt caps that inconvenience genuine customers.
Key terms
- MDR (Merchant Discount Rate)
- A fee charged to merchants on a digital payment; here 0.4% on UPI payments above Rs 2,000, capped at Rs 300.
- NPCI
- National Payments Corporation of India, the body that runs UPI and has issued the new MDR framework and its FAQs.
- P2PM
- Person-to-person-merchant category for small merchants that attracts zero MDR until collections cross Rs 1 lakh a month for three consecutive months.
- Merchant category code
- Classification assigned when a business is onboarded; some codes such as railways, telecom, insurance, fuel and utilities attract a flat Rs 5 charge.
- UPI AutoPay
- Recurring UPI mandate facility; genuine recurring AutoPay transactions are exempt from the new charges.
- P2P transactions
- Person-to-person UPI transfers, which remain free regardless of amount under the framework.
Practice questions
- Examine the rationale for reintroducing MDR on high-value UPI merchant transactions and the design gaps that could undermine its revenue objectives.
- Do transaction-level restrictions such as daily caps on repeated payments offer a workable answer to bill-splitting on UPI? Discuss with reference to NPCI's stated position.
- How should regulators distinguish between legitimate exemptions and misclassification in digital payment systems? Illustrate using the P2PM and merchant category code provisions.
Grounded only in the source report — figures and dates are the source's, not inferred.