The National Payments Corporation of India (NPCI) issued a circular on September 15, 2026, outlining a new Merchant Discount Rate (MDR) structure for UPI payments, effective October 15, 2026. Merchants will be charged an MDR of 0.4% on person-to-merchant UPI transactions exceeding ₹2,000. This fee will be paid to banks and payment processors and calculated based on the transaction value.
UPI payments of ₹2,000 or less will remain free of MDR.
This MDR applies solely to merchant payments and does not affect person-to-person UPI transfers. Consumers will continue to make UPI payments without charges, including transfers to friends and family, regardless of amount. Small merchants under the Person-to-Person Merchant (P2PM) category, receiving up to ₹1 lakh per month via UPI QR codes, will also remain exempt from MDR.
For regular merchant transactions above ₹2,000, the MDR is 0.4%. For example, a ₹3,000 payment will incur an MDR of ₹12, while a ₹50,000 transaction will attract ₹200. Transactions of ₹75,000 and above will have the MDR capped at ₹300 per transaction. Certain essential sectors—railways, telecom, and fuel—will have a flat MDR of ₹5 for transactions above ₹2,000.
The Ministry of Finance estimates that only around 4% of merchant transactions will be subject to the new charge. The NPCI aims to standardize the MDR framework for eligible UPI retail payments and clarify how charges apply across transaction categories. Banks, financial institutions, and payment service providers are expected to adopt the revised structure starting October 15, 2026.
