The National Payments Corporation of India (NPCI) has introduced the UPI Vyapaar Saksham Scheme to expand UPI acceptance among small merchants across Tier III to Tier VI cities and special regions by utilizing a merchant discount rate (MDR)-funded incentive program.
- Scheme funded by 5% MDR contributions from UPI ecosystem players
- Focus on Tier III-VI cities, northeastern states, Jammu & Kashmir, and Ladakh
- Incentives tied to deploying QR codes/soundboxes and increasing transaction volume
What happened
NPCI announced the UPI Vyapaar Saksham Scheme in November 2026 to promote digital payments among small merchants with annual turnovers up to ₹40 lakh. The scheme targets merchants primarily in smaller cities, northeastern states, and special regions such as Jammu and Kashmir and Ladakh, who currently have limited access to digital payment infrastructure.
Under the initiative, acquiring banks and other UPI stakeholders will contribute 5% of their MDR earnings to a fund that disburses incentives for deploying physical QR codes and soundboxes, as well as for driving transaction growth. The scheme will run for three years concurrent with the MDR framework implementation on select UPI transactions.
Why it matters
The scheme addresses a critical gap in digital payment acceptance infrastructure for small merchants, especially in less urbanized and remote regions of India. By providing financial incentives to banks for onboarding small merchants and encouraging usage, NPCI aims to expand UPI’s reach and deepen financial inclusion.
This effort is especially timely as India reintroduces MDR charges on certain high-value UPI transactions after a long zero-MDR period. Funding this scheme through a portion of MDR fees creates a sustainable model to boost merchant adoption and transaction volumes without relying on additional government subsidies.
What to watch next
Key indicators to monitor include the volume of new QR code and soundbox deployments and the quarterly percentage growth in eligible UPI transactions among targeted merchants. NPCI has set ambitious deployment targets, aiming for up to 1 crore new QR codes and up to 10 lakh new soundboxes installed annually.
Additionally, adoption rates and transaction growth in the northeast, Jammu & Kashmir, Ladakh, and smaller cities will be critical to evaluating the scheme’s effectiveness in reaching underserved markets. Stakeholders should also watch how MDR impacts merchant and customer behavior as the scheme progresses.