UPI Payments Above Rs 2,000: 76% Users May Shift to Cash, Cards If MDR Is Passed On

UPI payments above Rs 2,000 are set to face a new merchant discount rate (MDR) from October 15, but a survey suggests the change could alter how consumers make larger purchases if merchants attempt to pass the cost on. Under the new framework, merchants will pay a 0.4% MDR on specified person-to-merchant UPI transactions above Rs 2,000, capped at Rs 300 for transactions of Rs 75,000 and above. Consumers are not supposed to pay the charge directly.

A LocalCircles survey of more than 67,000 UPI users across 291 districts found that only 14% of respondents said they would continue using UPI and absorb an additional charge if a merchant imposed one. For the specific question, 31,206 responses were recorded.

Cash and cards could gain from larger payments

Among respondents asked what they would do if charged extra for a UPI payment above Rs 2,000, 27% said they would use cash, while 26% would switch to credit cards and 14% to debit cards. Another 4% would use bank transfers, NEFT or IMPS, while 9% would seek another payment option without an additional charge.

A separate question involving 37,654 responses found that 26% would prefer credit cards and another 26% cash for larger purchases if UPI became more expensive. Debit cards accounted for 13% and bank transfers for 11%, while 20% said UPI would remain their preferred option. This means 76% indicated they could move larger payments away from UPI.

Consumers are not supposed to pay MDR

The government has clarified that the MDR is a merchant-side charge and cannot be passed on to customers. UPI payments of Rs 2,000 or less and person-to-person transfers remain free. Qualifying small merchants also have separate exemptions under the framework.

The potential shift matters because high-value merchant payments represent a significant portion of UPI’s transaction value. UPI processed 24.51 billion transactions worth Rs 29.82 lakh crore in August 2026, according to the survey release.

The debate therefore centres less on whether consumers are formally charged and more on whether merchants absorb the MDR. A separate LocalCircles survey found that only 17% of surveyed merchants were willing to bear the 0.4% cost, while 41% said they would not.

For a Rs 5,000 payment, the standard MDR would amount to Rs 20; for Rs 50,000, it would be Rs 200. The government says customers should not be asked to pay these amounts, but the survey findings indicate that any attempt to recover the cost could encourage consumers to consider cash, cards and bank transfers for larger purchases.