Person-to-person UPI payments will remain free, while small-value merchant transactions up to Rs 2,000 will continue without charges
New Delhi: The National Payments Corporation of India (NPCI) has notified a 0.4% Merchant Discount Rate (MDR) on Person-to-Merchant (P2M) UPI transactions above Rs 2,000, effective October 15, 2026.
The MDR will apply to merchants accepting UPI payments above the specified threshold. For transactions of Rs 75,000 and above, the charge will be capped at Rs 300 per transaction.
However, Person-to-Person (P2P) UPI transactions will remain free, while merchant payments of up to Rs 2,000 will also continue without charges. These small-value transactions account for more than 95% of P2M UPI transaction volumes.
The new framework gives banks, payment aggregators, fintech companies and corporate accounting platforms time to update their systems before implementation.
MDR is a fee charged to merchants for accepting digital payments, with the applicable amount generally deducted before the remaining payment is transferred to the merchant.
The decision follows recommendations from a 22-member industry panel comprising banks, payment service providers and industry associations. The stated objective is to support the long-term sustainability of the UPI ecosystem while keeping everyday transactions accessible.
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