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For merchants in India, the practical response is not to abandon UPI automatically. First confirm whether your QR receipts keep you in the zero-MDR P2PM category. If you are classified as P2M, continue offering UPI while comparing card acceptance through a POS or mobile POS service, and retain cash where it is operationally useful. The Ministry of Finance FAQ dated 15 September 2026 schedules the selected UPI merchant-discount-rate (MDR) framework for 15 October 2026; as of 13 October, it is a scheduled change rather than a fee already in force.
What is scheduled to change on 15 October 2026?
The Department of Financial Services, Ministry of Finance FAQ dated 15 September 2026 describes a selected person-to-merchant (P2M) UPI MDR framework for India. Under its standard treatment, qualifying P2M transactions above ₹2,000 attract MDR of 0.4%. For a transaction of ₹75,000 or more, the MDR is capped at ₹300.
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“Above ₹2,000” means a payment of exactly ₹2,000 remains within the no-MDR threshold described by the FAQ; the standard rate applies once the amount exceeds ₹2,000. The cap matters on larger payments: 0.4% of ₹75,000 is ₹300, and a 0.4% calculation on any higher payment would be limited to ₹300 under the stated cap.
The effective date is 15 October 2026. On 13 October 2026, merchants should treat implementation as pending and check their acquiring bank or payment provider for the live configuration, settlement report format and classification applied to their account. The August 2026 Government of India statement described a threshold-based policy, while the later September FAQ supplies the detailed rates and date.
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This framework is about selected merchant payments, not every UPI transfer. Person-to-person payments remain free under the stated policy, and customers are not charged a UPI transaction fee. The MDR, when applicable, is a merchant-side deduction.
Check your merchant category before changing payment methods
P2PM: the small-merchant category
The FAQ says P2PM merchants receiving up to ₹1 lakh per month through UPI QR remain at zero MDR. This is the most important fact for a small shop, service professional or stall deciding whether a new payment method is necessary.
The ₹1 lakh figure concerns monthly inward UPI QR receipts, not the value of one isolated sale. Acquiring institutions monitor the threshold, and the FAQ says a merchant whose inward UPI receipts exceed ₹1 lakh per month for three consecutive months transitions into P2M. A single unusually large payment therefore does not, by itself, establish how your account will be treated.
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P2M: merchants subject to the selected framework
If your provider classifies you as P2M, the standard treatment described by the FAQ is 0.4% on qualifying payments above ₹2,000, subject to the ₹300 cap at ₹75,000 and above. Classification depends on the account record and provider monitoring, so confirm it directly rather than relying on a general description of your business size.
Category and instrument exceptions
The FAQ describes a flat ₹5 MDR above ₹2,000 for specified categories including fuel, insurance, public utilities, railways and telecom. It also describes a 0.02% rate, capped at ₹300, for capital-market transactions. These are category-based treatments; the merchant-category code (MCC) recorded by your acquirer can affect which rule is used.
Payment instrument matters as well. The described change concerns direct bank-account UPI. Google Pay for Business separately identifies RuPay credit card on UPI, credit lines, prepaid wallets and AutoPay as products with their own existing fee rules. Ask your provider which instruments are enabled on your QR and how each appears on your settlement statement.
Payment options worth comparing
| Option | What it provides | Costs and checks for the merchant |
|---|---|---|
| Continue accepting UPI | Fast QR payments and familiar customer checkout. Eligible P2PM receipts remain at zero MDR under the FAQ. | Confirm P2PM or P2M status, the ₹2,000 threshold, your MCC, payment instruments, provider deductions and settlement reports. Verify the live 15 October implementation. |
| Card acceptance through POS or mobile POS | Accepts debit and credit cards from customers who prefer cards or do not use UPI. | Obtain a current acquiring quote. Compare MDR by card type, terminal purchase or rental, connectivity, onboarding, settlement timing, support and any minimum commitments. |
| Cash | Works without a network, phone, QR code or card terminal. | Account for change, cash storage, reconciliation, deposits, theft risk and staff time. The sources reviewed do not establish a universal cash-handling cost. |
| Provider-specific UPI controls | Some providers may let you restrict higher-value QR payments while retaining smaller payments. | Google Pay for Business says its app allows merchants to disable acceptance above ₹2,000. Check whether your own provider offers the same control and understand the risk of declining a legitimate sale. |
No single option is cheapest for every shop. Compare the total merchant cost, not only the advertised percentage: per-transaction deductions, equipment, connectivity, settlement delays, reconciliation work and lost sales from a declined payment all matter.
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For a P2PM-eligible merchant, retaining UPI is usually the least disruptive path because the FAQ states that monthly QR receipts up to ₹1 lakh remain at zero MDR. Even a P2M merchant may find that most sales are below the threshold. The FAQ attributes more than 95% of total UPI P2M transaction volume to payments at or below ₹2,000. That is a national transaction-volume figure, not a forecast of the share of your own rupee receipts, so review your sales ledger before assuming your cost will be negligible.
Ask your acquiring bank or provider for four written details:
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- Your current P2PM or P2M classification and the monthly measurement period.
- The rule used when inward QR receipts exceed ₹1 lakh, including how three consecutive months are counted.
- The MDR and cap applied to each payment instrument and MCC on your account.
- How deductions will appear in settlement reports, invoices and daily reconciliation.
Keep a separate record of transaction amount, instrument, MDR and net settlement for the first weeks after implementation. It will reveal whether the provider is applying the expected rule and gives you evidence if a settlement needs correction.
Option 2: add card acceptance through POS or mobile POS
Physical POS and mobile POS are established card-acceptance infrastructure recognized in RBI material. A mobile POS can be useful for delivery, market stalls, field services or a counter where a fixed terminal is impractical. It is not a standalone answer, however: the device works through an acquiring relationship that determines which cards are accepted, what MDR is charged and when funds settle.
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What to request in a card-acquiring quote
- Merchant discount rate: Ask for rates separately for debit, credit, domestic, international and any premium or commercial cards you expect to see.
- Equipment cost: Confirm purchase price, rental, deposit, replacement charges, paper or accessories and the treatment of a damaged or inactive terminal.
- Connectivity: Check whether the terminal uses mobile data, Wi-Fi or both, who supplies the SIM or data plan and what happens during an outage.
- Settlement: Get the expected settlement day, bank-account requirements, holiday treatment, refund timing and a sample statement showing gross amount, fees and net credit.
- Onboarding: Verify documents, business and bank-account eligibility, MCC assignment and the process for changing a business address or settlement account.
- Support and disputes: Ask how chargebacks, failed reversals, duplicate debits and device faults are handled, and whether support is available during your trading hours.
RBI debit-card MDR material can explain why card acceptance has its own fee and infrastructure choices, but older published rates are not a current quote for a particular bank, acquirer or terminal. Get current written terms before buying or renting equipment.
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When card acceptance is worth the overhead
A card option is more compelling when your average ticket is above ₹2,000, customers regularly ask to pay by card, your location has unreliable mobile data for QR payments, or you serve visitors who do not have an Indian UPI setup. It may be less attractive when nearly every sale is a small QR payment and the terminal would sit unused while still generating rental or support costs.
Option 3: retain cash as a deliberate fallback
Cash avoids UPI MDR, card MDR and terminal dependency. It can also keep sales moving during an internet, electricity, phone or provider outage. The trade-off is operational: someone must hold change, count the drawer, reconcile sales, deposit notes and manage theft or loss risk.
Set a cash procedure rather than accepting cash informally. Record the opening float, issue receipts, reconcile the drawer against sales at closing and define who may remove cash for deposits. If you operate deliveries or multiple counters, decide how cash is transferred and logged. These controls are costs in staff time, even though there is no transaction percentage in the payment itself.
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How to compare your real cost
Build a one-month payment mix using actual transaction data. Separate payments at or below ₹2,000, payments above ₹2,000, payments at or above ₹75,000, and any category or instrument that may have a special rule.
| Illustrative payment | Standard 0.4% calculation | Effect of the stated cap |
|---|---|---|
| ₹2,000 | Within the stated no-MDR threshold | No standard 0.4% MDR under the FAQ’s threshold treatment |
| ₹10,000 | ₹40 | Below the ₹300 cap |
| ₹50,000 | ₹200 | Below the ₹300 cap |
| ₹75,000 | ₹300 | Cap begins at this amount |
| ₹100,000 | ₹400 before cap | ₹300 after the stated cap |
These are arithmetic illustrations of the announced standard rule, not a quotation for your account. Add card fees, terminal or rental charges, data costs, cash-handling time and any refunds or chargebacks to make an apples-to-apples comparison.
For each option, calculate:
- Average fee per transaction and total fee for the month.
- Fixed monthly equipment, data or rental costs.
- Net settlement time and the working-capital effect of delays.
- Time spent reconciling payments and resolving failures.
- Sales at risk if a customer cannot use their preferred method.
A practical decision process for a small merchant
- Export your recent payment history. Count UPI QR receipts by amount, date, instrument and MCC where available. Do not substitute the national “more than 95%” figure for your own data.
- Confirm classification in writing. Ask the acquiring institution whether you are P2PM or P2M, how the ₹1 lakh test is measured and what happens after three consecutive months above it.
- Check the implementation date. On or after 15 October 2026, compare the provider’s live tariff and settlement deductions with the September FAQ. Before that date, do not treat the fee as already active.
- Request at least one card-acquiring quote. Obtain the complete POS or mobile POS terms, not only a headline MDR percentage.
- Choose a mix, not a single winner. Many shops can keep UPI, add cards for larger or card-preferring customers and retain controlled cash handling for resilience.
- Review after one billing cycle. Compare expected and actual deductions, failed transactions, customer complaints and settlement timing. Change the mix only after observing your own numbers.
Rules that prevent expensive mistakes
- Do not add a UPI surcharge. The Ministry FAQ says merchants cannot pass MDR on to customers. Display the exact billed price and collect that amount; Google Pay for Business likewise says customers must pay the exact billed price.
- Do not confuse a merchant fee with a customer fee. The announced MDR is deducted from the merchant-side settlement. It is not a new UPI transaction charge billed to the person paying.
- Do not assume every UPI instrument follows the same rule. Direct bank-account UPI, RuPay credit card on UPI, credit lines, wallets and AutoPay can have different treatment.
- Do not use an old RBI rate as a current card offer. Historical guidance explains the structure of card MDR; only a current acquiring quote tells you what your business will pay.
- Do not assume one large payment changes your status immediately. The FAQ describes monitoring and transition after receipts exceed ₹1 lakh for three consecutive months.
- Do not block larger QR payments without considering lost sales. A provider control that accepts payments at or below ₹2,000 may reduce exposure but can also produce a declined checkout for a genuine customer.
What to put on your payment-policy checklist
- India-specific account classification: P2PM or P2M.
- Monthly inward UPI QR receipts and whether the three-month transition condition could apply.
- Registered MCC and any special category treatment.
- Payment instruments enabled on the QR and their separate fee rules.
- UPI deductions, card MDR, terminal charges, data costs and cash-control time.
- Settlement day, reconciliation report and dispute or refund process.
- Fallback method for network or device outages.
- Customer-facing price policy that does not add an MDR surcharge.
The strongest low-risk approach is to verify your classification, keep UPI available for the customers and transactions it serves efficiently, and add card or cash capability only when your own payment mix justifies the extra operational cost. The scheduled 15 October framework gives you a date to check; it does not eliminate the need to read your provider’s live terms.
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