Zero MDR for Small Merchants
The Government of India and NPCI have specifically protected small merchants from UPI MDR through a zero-MDR framework. Small merchants — including kirana shops, street vendors, micro-enterprises and small retailers — may qualify for zero-MDR status, meaning they pay no MDR on UPI transactions.
Who Qualifies as a Small Merchant?
Eligibility for the zero-MDR small merchant category typically depends on:
- Annual turnover threshold (verify current thresholds with your acquiring bank)
- Business registration status
- Payment instrument used (UPI QR code is common for small merchants)
- Merchant category code (MCC) assigned by the acquiring bank
Standard Threshold Still Applies
Even for merchants not in the zero-MDR small merchant category, standard P2M UPI transactions up to ₹2,000 attract zero MDR. For small merchants whose average transaction value is below ₹2,000 (which is common for kirana, chai shops, vegetable vendors etc.), the practical MDR impact may already be zero.
Impact on Small Business Cash Flow
Where zero MDR applies, small merchants receive 100% of the customer payment. This is a significant advantage over earlier card payment frameworks where MDR could significantly erode margins for small, high-volume, low-value businesses.