A new Merchant Discount Rate (MDR) framework for UPI will come into effect from October 15, 2026. Under the rules notified by the National Payments Corporation of India (NPCI), a 0.4% MDR will apply to eligible person-to-merchant (P2M) UPI transactions above ₹2,000.
The charge will be paid by merchants to their acquiring banks and payment service providers. Customers will not be charged any fee for making UPI payments, and UPI apps are not allowed to levy additional platform charges. Person-to-person (P2P) transfers will continue to remain completely free, regardless of the amount.
Key Features of the New Structure
Transactions up to ₹2,000: Zero MDR (these account for more than 95% of P2M volume).
Regular P2M transactions above ₹2,000: 0.4% MDR.
High-value transactions of ₹75,000 and above: Capped at ₹300 per transaction.
Examples: A ₹3,000 payment attracts ₹12; a ₹50,000 payment attracts ₹200; a ₹1 lakh payment is capped at ₹300.
Exemptions and Special Rates
Small merchants under the Person-to-Person-Merchant (P2PM) category — those receiving up to ₹1 lakh per month via UPI QR codes — remain fully exempt. Certain essential sectors such as railways, telecom, insurance, fuel and agriculture inputs will attract a flat MDR of ₹5 per transaction above ₹2,000 instead of the percentage rate. Capital market-related payments have a lower concessional rate.
The framework aims to support the long-term sustainability of UPI infrastructure while protecting consumers and micro-merchants. Officials have clarified that the vast majority of everyday transactions will continue without any MDR.