UPI MDR of 0.4% on large merchant payments from Oct 15, consumers remain free

The Reserve Bank of India (RBI) has backed the introduction of Merchant Discount Rate (MDR) on large-value UPI transactions, saying the move will help strengthen the long-term sustainability of India's digital payments ecosystem. In a post on X, the central bank said the measure would enable UPI to continue scaling, innovating and serving consumers and businesses across the country.The RBI said a fair distribution of MDR among ecosystem participants would support continued investment in technology, infrastructure and payment acceptance networks. Such investments, it added, could help expand UPI acceptance, deepen the customer base and sustain growth in transaction volumes.<blockquote class="twitter-tweet"><p lang="en" dir="ltr">The introduction of MDR on large-value UPI transactions (i.e., above ₹2,000) is an important step towards strengthening the long-term sustainability of India’s digital payments ecosystem. It will help UPI in continuing to scale, innovate and serve consumers and businesses across…</p>— ReserveBankOfIndia (@RBI) <a href="https://x.com/RBI/status/2099906201333227727?ref_src=twsrc%5Etfw">September 15, 2026</a></blockquote> <script async="" src="https://platform.x.com/widgets.js" charset="utf-8"></script>The comments come amid the government’s clarification on the revised MDR framework for UPI payments. Under the new provisions, MDR will apply to specified person-to-merchant (P2M) transactions above ₹2,000, while person-to-person (P2P) transactions will remain free, regardless of the amount transferred. Merchant payments up to ₹2,000 will also continue to remain free. The revised framework is scheduled to take effect from October 15, 2026.Also read: UPI Charges Explained: Will you pay a fee for Rs 2,000+ UPI payments? Government clarifies what users need to knowReiterating its commitment to the digital payments ecosystem, the RBI said UPI would continue to be “safe, seamless, affordable, and accessible”. It added that the fair and appropriate distribution of MDR among ecosystem participants would help support the long-term growth and sustainability of India’s digital payments network.

UPI payments above ₹2,000 to certain merchants will attract a Merchant Discount Rate (MDR) of 0.4% from October 15. But will customers have to pay more? Here’s what the new UPI MDR framework means, which transactions remain free, and who will have to bear the charge.

The proposed MDR (merchant discount rate) regime for UPI transactions aims to make the UPI ecosystem, a self-sustaining platform, while ensuring the impact on users is negligible

Mumbai, September 15, 2026: The National Payments Corporation of India (NPCI) on Tuesday announced a 0.4% Merchant Discount Rate (MDR) on certain Unified Payments Interface (UPI) transactions to merchants when the payment exceeds Rs 2,000, while clarifying that customers will not be charged for making UPI payments under the revised system.Under the new rules, Person-to-Merchant (P2M) UPI transactions above Rs 2,000 will attract an MDR of 0.4%. The charge will be capped at Rs 300 for a single transaction.What Is Merchant Discount Rate?MDR is a fee that banks and payment service providers charge merchants for processing digital payments. The amount can vary depending on the payment method, merchant category, transaction value and agreements between the businesses involved.When a customer makes a digital payment to a merchant, the merchant generally pays a small processing fee to the bank or company handling the transaction.While merchants are usually expected to bear the cost, some businesses may add it to the customer’s bill. This practice is more common for high-value card transactions, where MDR rules differ from those governing UPI payments.Who Will Pay The MDR?The 0.4% MDR will apply to P2M UPI payments above Rs 2,000. For transactions of Rs 75,000 or more, the fee will be capped at Rs 300.For instance, a Rs 1,00,000 transaction would ordinarily attract an MDR of Rs 400 at the 0.4% rate. With the cap in place, however, the merchant would pay a maximum of Rs 300.Small merchants covered by the Person-to-Person-Merchant (P2PM) framework will be exempt from MDR. NPCI introduced P2PM as a separate account category for small vendors receiving payments directly into their personal bank accounts.According to NPCI, the small-vendor category covers merchants receiving up to Rs 1 lakh a month through UPI QR directly into their accounts. The framework is intended to encourage digital payments among small businesses and vendors in the unorganised retail sector.Railways, Telecom, Insurance And Fuel Get Flat FeeThe percentage-based MDR will not apply to all merchant categories. Railways, telecom services, insurance and fuel are among the categories that will instead attract a fixed MDR of Rs 5 per transaction for payments above Rs 2,000.These merchants will pay Rs 5 regardless of the total transaction value instead of the 0.4% MDR.NPCI said the fixed fee is intended to keep costs under control for essential public services, utility payments and low-margin businesses such as fuel retailers.Also Watch: NPCI Committee To Decide UPI MDR Charges Soon; Large Merchant Transactions May Face FeesWhere Will The MDR Collected Go?NPCI said the MDR collected from high-value transactions will be distributed among different participants in the UPI ecosystem.The measure is aimed at funding the expansion of UPI to more users and merchants while supporting expenditure on resilience, cybersecurity and innovation.To get details on exclusive and budget-friendly property deals in Mumbai & surrounding regions, do visit: https://budgetproperties.in/

UPI remains free for consumers, while select merchant payments above Rs 2,000 will attract MDR from October 15.

The Ministry of Finance said that person-to-person transactions, which will be exempt, constitute 70% of the value of total UPI transactions. It added that only 4% of UPI transactions at merchants will attract the charge.