UPI transactions exceeding Rs 2,000 will be subject to a Merchant Discount Rate (MDR) of 0.4 per cent under a revised framework announced by the National Payments Corporation of India (NPCI). However, consumers will continue to make UPI payments without any charges.
Revised UPI MDR Rules
The new UPI Merchant Discount Rate framework will take effect from October 15, 2026, and will cover selected merchant transactions.
Under the revised system, a 0.4 per cent MDR will apply to Person-to-Merchant (P2M) UPI payments above Rs 2,000. The charge will be capped at Rs 300 for each transaction.
For example, a 0.4 per cent MDR on a Rs 2,000 payment amounts to Rs 8. The MDR is applicable within the merchant-side payment framework, while customers will continue to use UPI free of charge.
P2P and Small Transactions Exempt
Person-to-Person (P2P) payments and P2M transactions of up to Rs 2,000 will remain outside the MDR framework.
NPCI has also retained zero MDR for small merchants covered under the Person-to-Person Merchant (P2PM) framework. This includes small vendors receiving up to Rs 1 lakh per month through UPI QR payments directly into their bank accounts.
For certain categories such as railways, telecom, insurance and fuel, a fixed MDR of Rs 5 per transaction will be applicable on UPI payments above Rs 2,000.
No MDR Impact on 95% of P2M Transactions
The revised framework also proposes a dedicated fund aimed at helping small merchants strengthen digital payment infrastructure. The initiative will support existing merchants as well as businesses operating in Tier 3 and smaller markets.
NPCI said UPI transactions of up to Rs 2,000 will not be affected for any merchant. Such transactions account for more than 95 per cent of all UPI P2M payments.
Why NPCI Is Revising the MDR Framework
According to NPCI, the revised framework is designed to expand UPI acceptance, promote continued usage and bring more small businesses into India’s digital payments ecosystem.
The organisation said the MDR on higher-value transactions will be distributed among participants in the UPI ecosystem. The funds are expected to support expansion among new users and merchants, along with investments in resilience, cybersecurity and innovation.
NPCI also stated that the revised UPI MDR remains lower than the charges associated with several other digital payment methods, including credit cards, debit cards and wallets.