UPI MDR is coming: Can a Rs 6,000 bill be split into three Rs 2,000 payments to avoid charges? For now, NPCI has no daily cap
From October 15, 2026, UPI payments above Rs 2,000 made to large merchants will attract a Merchant Discount Rate (MDR) of 0.4%. However, the National Payments Corporation of India (NPCI) reportedly does not currently plan to introduce a separate daily limit on repeated UPI payments made to the same merchant.Such a restriction, if in place, could prevent businesses from breaking up larger payments into multiple transactions of Rs 2,000 or less.
No daily cap on UPI right now
Under the framework that will take effect from October 15, regular merchant UPI transactions above Rs 2,000 will attract a 0.4% merchant discount rate, with the charge capped at Rs 300 for transactions of Rs 75,000 or more.For example, a merchant receiving a single UPI payment of Rs 6,000 would incur an MDR of Rs 24.However, according to an ET report, instead of making one payment, the merchant could ask the customer to make three separate payments of Rs 2,000 each. Since each transaction would fall within the free limit, the merchant could avoid the Rs 24 charge, industry executives told the financial daily.The NPCI framework and the FAQs issued with it do not stipulate that multiple payments relating to a single bill must be clubbed together.“If the customer is willing to pay the merchant three times and both sides agree, it is between them. There is not much that can be done at the transaction level,” one person directly involved with NPCI told the financial daily. They also did not expect such workarounds to become significant over time.
Zero MDR loophole
Another potential gap relates to the zero-MDR person-to-person-merchant (P2PM) category available to small merchants. Banks and payment service providers track the UPI collections of merchants in this category and shift them to the regular merchant category if their collections cross Rs 1 lakh a month for three consecutive months.The FAQs do not clarify whether a merchant’s collections have to be aggregated across different bank accounts, QR codes or payment service providers.Industry executives said merchants could potentially distribute their receipts across these channels to keep each one below the prescribed threshold. Detecting such arrangements effectively would require linking the different accounts and payment channels to the same business.Another possible workaround would be to direct business payments to personal UPI IDs, since person-to-person transactions continue to remain free regardless of the amount.However, doing so would effectively present commercial receipts as personal transfers rather than using a legitimate exemption. Banks or payment providers could subsequently reclassify the account.Businesses could also gain from being incorrectly assigned to a merchant category that attracts a flat Rs 5 charge instead of the 0.4% rate.Railways, telecom services, insurance, fuel and utilities are among the categories eligible for concessional charges. Merchant category codes are assigned when a business is onboarded, and deliberately providing an incorrect classification would therefore amount to a breach of the rules, industry executives said.Genuine recurring UPI AutoPay transactions are exempt from the charges. However, executives said treating an ordinary sale as a recurring payment merely to claim the exemption would constitute misclassification.People familiar with the matter said NPCI expects some merchants to explore these workarounds once the new framework comes into effect. However, it does not currently believe additional transaction-level limits are necessary. The payments body also does not expect merchants splitting bills to become widespread or continue as a significant practice over the longer term.More than 95% of merchant-payment volumes will continue to remain free under the framework. At the same time, industry estimates show that transactions above Rs 2,000 represent around two-thirds of the total value of merchant payments. This means widespread attempts to avoid the charges could have a meaningful impact on the collections expected under the new system.NPCI has said the MDR revenue will be used to support UPI infrastructure, cybersecurity and customer service.
