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LocalCircles reports that 83% of surveyed businesses accepting UPI would not absorb a 0.4% merchant discount rate (MDR) on qualifying payments above ₹2,000. That measures stated willingness—not how merchants have actually responded. It does not mean 83% will add a surcharge or stop accepting UPI. The government’s framework places MDR on merchants, while keeping several UPI payment types and merchant categories at zero MDR.
What the 83% finding means
LocalCircles asked businesses accepting UPI: “If you are a business that accepts UPI payments, how much is the maximum MDR that you would be willing to bear on UPI payments above INR 2000?” Its 2026 report says 83% were unwilling to absorb the notified 0.4% rate. The survey included more than 32,000 businesses and merchants across 242 districts. LocalCircles’ survey report
The other reported responses help put that headline in context: 41% said they would bear no MDR, while 17% said they would bear 0.4% or more. LocalCircles also reports that 15% were willing to bear up to 0.04%. These are answers about what respondents said they would accept, not records of charges levied or payment choices made.
In particular, the result does not establish that 83% of merchants will pass the cost to customers, reject UPI, or steer customers toward another method. The survey does not measure those outcomes or establish that its respondents represent every merchant in India.
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Which UPI payments have MDR under the official explanation?
The Ministry of Finance’s 15 September 2026 explainer distinguishes payment type, amount, merchant qualification, and sector. The general 0.4% rate is not a fee on every UPI payment above ₹2,000. Ministry of Finance UPI MDR explainer
| Transaction or merchant category | Treatment in the government’s 15 September 2026 explanation |
|---|---|
| Person-to-person (P2P) UPI | Free regardless of amount. |
| Person-to-merchant (P2M) UPI payments up to ₹2,000 | Free. |
| Qualifying small merchants in the P2PM category | Zero MDR on all transactions when they receive up to ₹1 lakh per month through UPI QR codes. |
| Specified P2M transactions above ₹2,000 | General MDR of 0.4%, capped at ₹300 for transactions of ₹75,000 and above. |
| Essential and thin-margin sectors, including railways, telecommunications, insurance, fuel, and agricultural inputs | Flat ₹5 MDR for transactions above ₹2,000. |
| Capital-market payments, including mutual funds, securities, stockbrokers, and dealers | 0.02%, capped at ₹300. |
The government says approximately 96% of P2M transactions remain unaffected. It also says MDR is distributed among payment ecosystem participants, including banks and payment application providers, rather than collected as government revenue: “It is clarified that MDR is neither a tax nor a charge collected by the Government or NPCI.” Ministry of Finance UPI MDR explainer
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Who pays MDR—and does a customer pay extra?
Under the official explanation, MDR is a merchant-side charge. The government says customers will not pay MDR. Whether an individual merchant changes prices or payment practices is a separate question; the LocalCircles survey does not establish what merchants did after the framework was introduced.
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Are UPI transactions expected to fall?
India Today reported LocalCircles’ estimates of a 10% fall in UPI transaction value and a 4% fall in transaction volume after implementation. These are forecasts, not measured post-policy declines, so they should not be read as evidence that UPI use has already dropped by those amounts. India Today’s 5 October 2026 report
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What merchants and customers should check
- Identify whether the payment is P2P or P2M; the general MDR framework described here concerns specified merchant transactions, not person-to-person transfers.
- For a merchant payment, check whether the amount is above ₹2,000 and whether the merchant qualifies for the P2PM small-merchant zero-MDR treatment.
- Check whether a listed essential/thin-margin or capital-market category has its own rate rather than assuming the general 0.4% applies.
- Treat the LocalCircles percentages as stated survey preferences, not a prediction of how a particular shop will accept payment.
The Ministry of Finance’s explainer is dated 15 September 2026. Because payment rules can change, verify the current official guidance for the transaction and merchant category in question.
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