<p>The National Payments Corporation of India (NPCI) announced on Tuesday (Sep 16) announced that 0.4 per cent fee will be charged on Unified Payments Interface (UPI) transactions to certain merchants when the transaction value exceeds ₹2,000. It also clarified that customers will not have to pay any fee for making UPI payments under the revised system. As per the new rules, Person-to-Merchant (P2M) UPI payments above ₹2,000 will attract a 0.4 per cent Merchant Discount Rate (MDR). However, the charge will not exceed ₹300 for a single transaction. The new MDR structure will be effective from October 15, 2026.</p><h2>What is MDR?</h2><p>MDR refers to the fee charged to merchants by banks and payment service providers for processing digital payments. The amount depends on factors such as the payment method, the type of merchant, the transaction value, and the agreement between the businesses involved. In a digital payment system, a customer pays a merchant electronically, while the merchant pays a small fee to the company or bank that processes the transaction. Although merchants are generally expected to bear this cost, some businesses may add the charge to the customer's bill.&nbsp;</p><p>&nbsp;</p><p><strong>Also Read: </strong><a href="https://www.wionews.com/india-news/upi-rule-change-0-4-mdr-on-merchant-payments-above-2-000-consumers-unaffected-1789489025740"><strong>UPI rule change: 0.4% MDR on merchant payments above ₹2,000</strong></a></p><h2>Who will have to pay the MDR fee?</h2><p>The 0.4 per cent MDR will apply to Person-to-Merchant (P2M) UPI payments exceeding ₹2,000. For transactions of ₹75,000 or more, the charge will be limited to ₹300. For example, a ₹1,00,000 transaction would otherwise attract a 0.4 per cent charge of ₹400. However, because of the cap, the maximum MDR payable for that transaction will be ₹300.Small merchants covered under the P2PM (Person-to-Person-Merchant) framework will not be charged MDR. The small vendor category includes merchants receiving up to ₹1 lakh per month through UPI QR directly into their accounts, the NPCI said in a document. The category is designed to encourage digital payments among small businesses and vendors in the unorganised retail sector.</p><p>&nbsp;</p><p><strong>Also Read: </strong><a href="https://www.wionews.com/india-news/upi-payments-up-to-rs-2-000-to-stays-free-but-bigger-transactions-may-soon-cost-you-govt-1789446116727"><strong>UPI payments up to Rs 2,000 to stays free, but bigger transactions may soon cost you: Govt</strong></a></p><h2>How will MDR fee be calculated?</h2><p>The MDR is calculated according to the value of each transaction. For a purchase of ₹3,000, the 0.4 per cent rate would mean an MDR of ₹12, which the merchant pays to its acquiring bank. The maximum MDR is ₹300 for transactions of ₹75,000 or more, while payments below ₹2,000 will not incur any MDR. For a ₹50,000 transaction, the same rate would result in an MDR of ₹200. However, for a payment of ₹1,00,000, the 0.4% charge would be ₹400, but the merchant would pay only ₹300 due to the cap. Certain categories, including railways, telecom services, insurance, and fuel, will instead be charged a fixed MDR of ₹5 per transaction for payments above ₹2,000.<br>&nbsp;</p>

NPCI will impose a 0.4% Merchant Discount Rate on certain merchant UPI payments above Rs 2,000 from October 15, 2026, capped at Rs 300 per transaction. Consumers will not pay the fee, while small P2PM merchants remain exempt.

The National Payments Corporation of India (NPCI) announced on Tuesday (Sep 16) announced that 0.4 per cent fee will be charged on Unified Payments Interface (UPI) transactions to certain merchants when the transaction value exceeds ₹2,000. It also clarified that customers will not have to pay any fee for making UPI payments under the revised system. As per the new rules, Person-to-Merchant (P2M) UPI payments above ₹2,000 will attract a 0.4 per cent Merchant Discount Rate (MDR). However, the charge will not exceed ₹300 for a single transaction. The new MDR structure will be effective from October 15, 2026. What is MDR? MDR refers to the fee charged to merchants by banks and payment service providers for processing digital payments. The amount depends on factors such as the payment method, the type of merchant, the transaction value, and the agreement between the businesses involved. In a digital payment system, a customer pays a merchant electronically, while the merchant pays a small fee to the company or bank that processes the transaction. Although merchants are generally expected to bear this cost, some businesses may add the charge to the customer's bill. Also Read: UPI rule change: 0.4% MDR on merchant payments above ₹2,000 Who will have to pay the MDR fee? The 0.4 per cent MDR will apply to Person-to-Merchant (P2M) UPI payments exceeding ₹2,000. For transactions of ₹75,000 or more, the charge will be limited to ₹300. For example, a ₹1,00,000 transaction would otherwise attract a 0.4 per cent charge of ₹400. However, because of the cap, the maximum MDR payable for that transaction will be ₹300.Small merchants covered under the P2PM (Person-to-Person-Merchant) framework will not be charged MDR. The small vendor category includes merchants receiving up to ₹1 lakh per month through UPI QR directly into their accounts, the NPCI said in a document. The category is designed to encourage digital payments among small businesses and vendors in the unorganised retail sector. Also Read: UPI payments up to Rs 2,000 to stays free, but bigger transactions may soon cost you: Govt How will MDR fee be calculated? The MDR is calculated according to the value of each transaction. For a purchase of ₹3,000, the 0.4 per cent rate would mean an MDR of ₹12, which the merchant pays to its acquiring bank. The maximum MDR is ₹300 for transactions of ₹75,000 or more, while payments below ₹2,000 will not incur any MDR. For a ₹50,000 transaction, the same rate would result in an MDR of ₹200. However, for a payment of ₹1,00,000, the 0.4% charge would be ₹400, but the merchant would pay only ₹300 due to the cap. Certain categories, including railways, telecom services, insurance, and fuel, will instead be charged a fixed MDR of ₹5 per transaction for payments above ₹2,000.

<p>NPCI will impose a 0.4% Merchant Discount Rate on certain merchant UPI payments above Rs 2,000 from October 15, 2026, capped at Rs 300 per transaction. Consumers will not pay the fee, while small P2PM merchants remain exempt.</p>

What is Merchant Discount Rate (MDR) and how will new UPI charges affect customers?

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What is Merchant Discount Rate (MDR) and how will new UPI charges affect customers?