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The practical way to accept UPI in a shop, stall, or service business is to onboard as a merchant with an acquiring bank or its merchant-payment partner. The provider assigns your business category, issues or approves a merchant-specific QR or another UPI integration, and tells you where and when money settles. Ask for those terms in writing before displaying the QR.
Do not assume every merchant pays the same rate. The Department of Financial Services FAQ dated 15 September 2026 says its selected P2M framework takes effect on 15 October 2026: covered P2M transactions above ₹2,000 carry 0.4% MDR, with a ₹300 cap for transactions of ₹75,000 or more. Eligible small P2PM merchants receiving up to ₹1 lakh per month through UPI QR continue at zero MDR under the FAQ. Your classification and contract determine which rule applies.
What you need before accepting UPI
UPI acceptance is a merchant service, not simply a personal UPI ID printed on paper. NPCI explains that a merchant enables UPI by partnering with an acquiring bank, which supplies the infrastructure and assigns the merchant category code. The acquiring bank may work directly with you or through a payment aggregator. Start by asking your existing business bank or a merchant-payment provider:
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- What merchant category code (MCC) and business classification will be recorded?
- Will the account be treated as P2PM (person-to-merchant, small merchant) or P2M (person-to-merchant)?
- Which account receives settlement, and how quickly after a successful payment?
- What charges apply to onboarding, settlement, reports, support, QR materials, soundboxes, or other equipment?
- How do you report a missing payment, request a refund, or escalate a complaint?
NPCI’s UPI FAQ says a merchant receives funds immediately after the customer confirms a transaction into the merchant pool or bank account, according to the merchant agreement. “Immediately” therefore does not replace the need to confirm your own settlement destination and timing.
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How the merchant UPI flow works
1. The acquiring bank onboards your business
The bank or its partner verifies your business details, assigns an MCC, and creates the merchant record. That record is what lets a provider issue a QR tied to your business rather than to an employee’s personal account.
2. You choose an acceptance mode
NPCI lists QR, intent, application-based, and collect integrations. A neighbourhood counter often starts with a static QR. A larger checkout may use a dynamic QR that includes the bill amount, an app integration, or an intent flow from a website or mobile application. Collect requests can be useful when you need to request a specific amount from a customer, but the provider must support that mode for your account.
3. The customer authorises payment
The customer scans or opens the UPI request and approves it in their UPI app. Keep your own confirmation channel visible; a customer’s screenshot is not proof that your account was credited.
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4. Settlement and records follow your agreement
After confirmation, the provider records the transaction and settles to the account you nominated. Download or review the provider’s transaction history and compare successful entries with bank credits during your daily close.
UPI MDR rules effective from 15 October 2026
The following figures come from the Department of Financial Services’ FAQ on MDR on Select UPI (P2M) Transactions, dated 15 September 2026. The FAQ says the framework takes effect on 15 October 2026. It is scoped to merchant and transaction categories; it is not a universal price for every UPI payment.
| Situation described in the FAQ | Policy MDR treatment | What to verify |
|---|---|---|
| Covered P2M transaction of ₹2,000 or less | The FAQ’s 0.4% rate is stated for transactions above ₹2,000; the applicable category treatment must be confirmed for your account. | Your assigned category and provider schedule |
| Covered P2M transaction above ₹2,000 and below ₹75,000 | 0.4% MDR | Whether your merchant category is covered |
| Covered P2M transaction of ₹75,000 or more | 0.4% MDR, capped at ₹300 per transaction | How the cap is applied and shown on statements |
| Eligible small P2PM merchant receiving up to ₹1 lakh per month through UPI QR | Zero MDR under the FAQ’s P2PM description | Eligibility, monthly inward-credit measurement, and QR requirement |
| Qualifying P2PM merchant receiving one payment above ₹2,000 | The single payment does not by itself create MDR; account classification remains relevant | Whether the account remains within the P2PM conditions |
The FAQ describes a transition from P2PM to P2M when monthly inward UPI payment credits exceed ₹1 lakh for three consecutive months. Ask your provider how it measures that threshold and when a classification change would appear on your statement. The same framework states that consumers do not pay a UPI transaction charge.
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Illustrative arithmetic, not a quote for your account
At 0.4%, a covered ₹3,000 P2M payment would produce ₹12 in MDR before any other contractual items. A covered ₹75,000 payment would calculate to ₹300, which is also the stated cap. These examples do not establish that your transaction is covered or that no other provider charge exists.
Special categories need separate confirmation
The FAQ describes separate treatment for specified service categories. If your business is in one of those sectors, do not apply the general 0.4% figure without confirming the category assigned by your acquiring provider and reading the relevant part of the dated FAQ.
P2PM versus P2M: the classification that changes your cost
P2PM is the small-merchant classification used in the FAQ’s zero-MDR description. The important test is not just the size of one sale: it includes the account’s monthly inward UPI credits and the merchant’s eligibility. A shop can therefore have a ₹2,500 customer payment and still need to check whether it remains an eligible P2PM account.
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If inward credits exceed ₹1 lakh per month for three consecutive months, the FAQ describes movement to P2M. Request written notice of any change, the date it takes effect, and the new rate schedule. Keep monthly UPI receipts in your bookkeeping so a later statement can be reconciled with the provider’s classification.
Costs beyond the policy MDR
MDR is a network or policy charge; it is not necessarily the complete cost of operating a merchant account. Public policy documents do not establish every provider’s commercial terms. Before signing, request a written schedule covering:
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- Settlement or payout charges.
- Monthly reporting, support, or account-maintenance fees.
- QR stand, sticker, printer, or soundbox purchase, rental, replacement, and maintenance.
- Dynamic-QR, application, or API charges, if your integration uses them.
- Refund, reversal, dispute, or chargeback handling.
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Step-by-step: onboard and go live
- Contact the bank or merchant-payment provider. Ask for the acquiring bank’s name and the merchant onboarding process. NPCI identifies the acquiring bank as the route for enabling merchant UPI.
- Prepare accurate business information. Use the legal or trading name customers will recognise, the correct business address and contact details, and the account that should receive settlements. Inaccurate information can lead to a QR that does not match your receipts.
- Confirm MCC and classification. Ask which merchant category code is being assigned, whether the account is P2PM or P2M, what monthly threshold applies, and how three consecutive months above ₹1 lakh would be handled.
- Get settlement terms in writing. Record the destination account, expected timing, holiday or cut-off rules, statement format, and the support contact for a missing credit.
- Select the integration. Choose static QR, dynamic QR, intent, application-based, or collect according to checkout volume and your provider’s supported options.
- Test before displaying it. Make a small payment, verify the merchant name shown to the payer, check the provider transaction record, and confirm the bank credit. Reverse or refund the test according to the provider’s documented process.
- Display only the approved merchant QR. Do not replace it with an employee’s personal QR or a copied image. Keep a spare printed copy if the original is damaged.
- Train staff and start reconciliation. Staff should look for the provider confirmation or transaction entry, not only a customer’s phone screen. At closing, compare the day’s UPI entries with bank credits and record exceptions.
Displaying a safe, readable QR
NPCI’s BHIM-UPI Guidelines updated June 2026 specify information and dimensions for particular QR designs. For the referenced sticker design, the guide calls for a QR of at least 2 cm by 2 cm and merchant-name and UPI-ID elements. Soundbox and dynamic-QR layouts have their own specifications.
- Use the QR issued or approved by your acquiring provider.
- Keep the code flat, clean, and unobstructed; avoid placing tape over the printed pattern.
- Place the merchant name and UPI ID where the customer can read them before paying.
- Position the stand or sticker where glare, distance, and queue traffic will not make scanning difficult.
- If you add a holder or stand, treat it only as a way to present your own approved QR; it does not replace merchant onboarding.
Daily controls that prevent payment mistakes
Reconcile confirmations with credits
At opening, check that the QR still displays the correct merchant name. During the day, retain the provider transaction reference for unusual or high-value payments. At closing, match the provider history to the settlement account and flag any entry that is pending, reversed, duplicated, or absent.
Handle a customer who shows “successful” but you have no credit
- Ask for the transaction reference, amount, and time; do not ask the customer to pay again immediately.
- Check the provider’s merchant transaction history and your settlement account.
- Wait for the status shown by the acquiring provider, not just a screenshot.
- If it remains unresolved, raise the merchant transaction grievance with the acquiring bank. NPCI directs merchants to that bank for UPI transaction complaints.
Refunds and reversals
Use the provider’s documented refund or reversal workflow and retain the reference number. Do not promise a refund time that is not in your agreement. Ask support how a refunded transaction appears in statements and whether any provider fee is retained.
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Government incentive programmes support the wider low-value UPI ecosystem; they are not a direct fee waiver or payment to every shop. A Ministry of Finance release published through PIB on 19 March 2025 reported total incentive payouts of ₹1,389 crore, including ₹957 crore for BHIM-UPI, in FY 2021-22; ₹2,210 crore total, including ₹1,802 crore for BHIM-UPI, in FY 2022-23; and ₹3,631 crore total, including ₹3,268 crore for BHIM-UPI, in FY 2023-24. Those historical figures do not tell you what your provider will charge. Read the current agreement and the 15 September 2026 FAQ instead.
An older NPCI release from 30 August 2019 quoted then-Managing Director and CEO Dilip Asbe saying, “The Zero MDR for transaction up to Rs 100 and increased limit for P2PM category (Small merchants) will help faster migration from cash to digital using BHIM UPI.” That statement describes the 2019 policy context; it is not the current 2026 threshold or a substitute for the current FAQ.
Keep these records before launch
- A copy of the onboarding or merchant agreement.
- The acquiring bank’s name and merchant support contacts.
- Your MCC, P2PM/P2M classification, and the rule for reviewing monthly inward credits.
- The current MDR and provider-fee schedule, including effective date.
- Settlement account details and expected timing.
- Refund, reversal, and complaint instructions.
- A sample transaction reference and your daily reconciliation method.
Policy terms can change. The Ministry of Finance’s 8 August 2026 statement, “No Charges for UPI Users; Vast Majority of Transactions to Remain Free,” was earlier policy context; the later Department of Financial Services FAQ dated 15 September 2026 supplies the 15 October 2026 effective date and the selected rates. Recheck current Ministry of Finance, RBI, and NPCI notices whenever you renew your merchant agreement.
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