The National Payments Corporation of India (NPCI) has notified a scheme that uses merchant fees on UPI to pay banks for signing up small shops and growing the payments those shops accept. It is called the UPI Vyapaar Saksham Scheme. It will not start until UPI merchant discount rate (MDR) takes effect, and that date has not been announced.
What NPCI has announced
According to The Economic Times and CNBC-TV18, both of which reviewed the circular, NPCI sent it to all UPI members on November 11. The scheme runs for three years from the date UPI MDR is implemented. The circular gives neither that date nor any MDR rates.
Who it is meant for
CNBC-TV18 reports that a small merchant here means one with annual turnover of up to Rs 40 lakh in the previous financial year. The focus is on Tier 3 to Tier 6 centres, the North-Eastern states, Jammu and Kashmir and Ladakh. Merchants in Tier 1 and Tier 2 centres qualify only if they are covered by central government schemes such as PM SVANidhi and PM Vishwakarma. Only transactions of Rs 2,000 or less count, and NPCI has said it will not reward splitting payments to stay under that limit.
How the money works
As reported by CNBC-TV18, issuing banks, acquiring banks, payer payment service providers and UPI app providers will each put 5 per cent of their MDR share into a fund. It is split three ways:
- New merchants (30 per cent): Rs 300 per physical QR code and Rs 750 per soundbox for a new merchant who makes at least 25 eligible transactions in any two months of a quarter and at least Rs 5,000 in monthly value.
- Transaction growth (50 per cent): 0.03 per cent of eligible transaction value, with a further 50 per cent for targeted geographies. The acquiring bank must show at least 5 per cent quarter-on-quarter growth.
- Incremental growth (20 per cent): 0.20 per cent of the extra eligible value in targeted geographies over the previous quarter.
The incentives are paid to acquiring banks, not directly to shopkeepers. Claims are settled quarterly.
What to watch next
NPCI expects 6 to 10 million new physical QR codes and 0.5 to 1 million new soundboxes a year, and 30 to 50 per cent annual volume growth among existing small merchants. Everything depends on when UPI MDR is notified, which neither report says has happened. Until then, this is a framework, not a payout.
Sources: NPCI circular dated November 11, 2026, as reviewed by The Economic Times and CNBC-TV18. We have not seen the circular itself.
