Run a small shop? How to check whether UPI MDR applies to you

UPI payments above ₹2,000 will attract a merchant fee for eligible businesses from October 15. Here's how small shopkeepers can check if the new MDR rules apply to them

From October 15, a 0.4 per cent merchant discount rate (MDR) will apply to eligible person-to-merchant (P2M) UPI transactions above ₹2,000. However, small merchants classified under the person-to-person-merchant (P2PM) framework will continue to get zero MDR. This exemption applies even if a customer makes a single payment of more than ₹2,000.

But how do you know whether your business falls under the P2PM category or the regular P2M category?

Are you classified as a P2PM merchant?

P2PM stands for Person-to-Person-Merchant. It is a special account category created by the National Payments Corporation of India (NPCI) for small vendors who receive UPI payments directly into their bank accounts.

Under the framework, small merchants receiving up to ₹1 lakh a month through UPI QR codes can qualify for zero MDR. The category is aimed at micro-businesses and vendors in the unorganised retail sector who may not operate through formal commercial merchant accounts.

The classification is handled through the merchant's bank or payment service provider. A small vendor does not need to have a GST registration to qualify for zero MDR under the P2PM category.