&imwidth=800&imheight=600&format=webp&quality=medium "UPI rule change: 0.4% MDR on merchant payments above ₹2,000; consumers unaffected")
The government on Tuesday (September 15) announced that Unified Payments Interface (UPI) payments above ₹2,000 will attract a Merchant Discount Rate (MDR) of 0.4 per cent under a revised framework introduced by the National Payments Corporation of India (NPCI). However, consumers will continue to use UPI without paying any charges.
The revised framework will come into effect from October 15, 2026, and will apply to selected merchant transactions.
Industry data suggests that around 96 per cent of all UPI transactions by volume are below ₹2,000, keeping the vast majority of payments outside the new MDR framework.
What changes for UPI payments above ₹2,000?
Under the new framework, a 0.4 per cent MDR will apply to Person-to-Merchant (P2M) UPI transactions above ₹2,000. The charge will be capped at Rs 300 for transactions of Rs 75,000 and above.
For example, a 0.4 per cent MDR on a ₹2,000 transaction would amount to ₹8. However, this is a merchant-side charge and does not mean consumers will have to pay a fee when making UPI payments.
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Person-to-Person (P2P) transactions will remain outside the MDR framework. P2M transactions of up to ₹2,000 will also continue to remain free of MDR.
Small merchants covered under the Person-to-Person Merchant (P2PM) framework will also continue to get zero MDR. This category includes small vendors receiving up to ₹1 lakh per month through UPI QR payments directly into their bank accounts.
Special charges for some services
NPCI has also set a flat MDR of ₹5 per transaction for certain merchant categories. These include railways, telecom services, insurance and fuel.
The ₹5 charge will apply to UPI payments above ₹2,000 in these specified categories.
The revised framework also proposes a dedicated fund to support digital payment infrastructure for existing small merchants and businesses in Tier 3 and smaller markets.
NPCI said there would be no impact on small-value UPI transactions of up to ₹2,000 for merchants. Such transactions account for more than 95 per cent of all UPI P2M transactions.
Why has NPCI revised the MDR framework?
The new framework is aimed at expanding UPI acceptance and encouraging its continued use among merchants. It also seeks to bring more small businesses into India's digital payments ecosystem.
According to NPCI, the MDR collected on high-value transactions will be distributed among different players in the UPI ecosystem. The funds will help support the expansion of UPI to new users and merchants, along with investments in resilience, cybersecurity and innovation.
NPCI also said the revised UPI MDR remains lower than the charges linked to several other digital payment methods, including credit cards, debit cards and wallets.
