A major change in the UPI payment system is set to affect certain high-value merchant transactions from October 15, 2026. Under the new Merchant Discount Rate (MDR) framework, a 0.4% charge will apply to eligible UPI person-to-merchant payments above ₹2,000. The MDR will be borne by merchants rather than directly charged to customers. Fuel transactions above ₹2,000 are subject to a flat MDR of ₹5.
The proposed charges have already triggered opposition from traders and petrol pump dealers. In Madhya Pradesh, petrol pump dealers have announced that they will stop accepting UPI payments above ₹2,000 for petrol and diesel purchases from October 16 if the MDR issue is not withdrawn.
Why Are Petrol Pump Dealers Opposing the MDR?
Ajay Singh, president of the Madhya Pradesh Petroleum Dealers Association, said fuel retailers operate on narrow margins and would find it difficult to absorb the additional cost.
According to Singh, a typical petrol pump could face an additional expense of around ₹590 per day, or approximately ₹17,700 per month, based on the number of high-value UPI transactions being handled. He said the association has raised the issue with the relevant authorities.
The proposed restriction is expected to affect around 4,700 petrol pumps across Madhya Pradesh. Dealers have indicated that customers will still have access to other payment options, including debit and credit cards.
CAIT Raises Concern Over UPI Payment Restrictions
The Confederation of All India Traders (CAIT) has also expressed concern about the decision by petrol pump dealers in Madhya Pradesh. The organisation has highlighted the possible impact on digital payments and businesses that have increasingly relied on UPI for everyday transactions.
CAIT representatives have argued that UPI has become an important part of India’s digital payment system and that the introduction of MDR on eligible high-value transactions could create additional costs for merchants.
What Will the New UPI MDR Mean?
Under the reported framework, eligible person-to-merchant UPI transactions above ₹2,000 will attract an MDR of 0.4%. For example, a ₹10,000 eligible transaction would result in an MDR of ₹40.
The new framework also provides sector-specific treatment, including a flat ₹5 MDR for fuel transactions above ₹2,000. The charge is intended to be borne by merchants rather than passed on to customers.
For petrol pump customers in Madhya Pradesh, the immediate issue is therefore not a direct UPI fee but the decision by dealers to restrict UPI payments above ₹2,000 from October 16. The final impact will depend on how the MDR framework and the dealers’ decision are implemented.
Disclaimer: This article is for general informational purposes only. UPI rules, MDR rates, payment limits and merchant policies may be revised by the authorities or payment providers. Customers should check the latest official information before making high-value UPI or fuel payments.