MDR on UPI notified: NPCI says 0.4% fee applicable on person-to-merchant transactions above Rs 2,000 effective October 15, 2026

The National Payments Corporation of India (NPCI) has notified a Merchant Discount Rate (MDR) of 0.4% on Person-to-Merchant (P2M) UPI transactions above Rs 2,000. Person-to-person transactions will continue to remain free.For transactions of Rs 75,000 and above, the MDR will be capped at Rs 300 per transaction.The MDR will be effective from October 15, 2026. . This timeline gives acquiring banks, payment aggregators, fintech applications, and corporate accounting platforms adequate lead time to update their software engines and billing systems.There is no impact on small-value UPI transactions up to Rs 2,000, which comprise more than 95% of the total volume of UPI (P2M) transactions.The intent of levying reasonable MDR is to ensure that UPI remains, accessible and convenient for everyday transactions while supporting long-term ecosystem sustainability.A 22-member panel representing banks, payment service providers and various industry associations met to decide on the charges that merchants have to pay for UPI transactions above Rs 2,000.The UPI & Services Steering Committee includes organisations such as the Indian Banks’ Association (IBA) and Payments Council of India (PCI).The committee examined the Merchant Discount Rate applicable to UPI transactions above Rs 2,000. The decision took into account factors such as the sustainability of the payment ecosystem and its scope for further market expansion.In Brazil’s PIX system, for instance, the merchant charge is around 0.33 per cent, while the corresponding charge in China is about 0.40 per cent.

Person-to-Person Transactions Continue To Be Free

The government said on Monday that person-to-merchant UPI transactions of up to Rs 2,000, including those made through RuPay debit cards, will remain free. Person-to-person UPI payments will also continue to carry no charge.A gazette notification dated September 14 states that banks and system providers cannot impose any charge, either directly or indirectly, on a person making or receiving a payment through a RuPay debit card or through a UPI transaction of up to Rs 2,000.The notification comes after Section 10 A of the Payment and Settlement Systems Act, 2007, was amended to create an enabling framework for levying MDR on payments made through UPI and other electronic payment modes notified under the law.Parliament passed the amendment Bill during the Monsoon Session in August this year.During the parliamentary debate on the Bill, Finance Minister Nirmala Sitharaman had assured members that consumers would continue to be able to make UPI payments free of charge. She said any charges introduced in the future would be restricted to certain categories of merchant transactions.The finance minister had also sought to address concerns that UPI users could broadly be subjected to charges. She said most merchant payments, including small-value transactions made to roadside vendors, would continue to be free.“The vast majority of merchant transactions, including ordinary, low-value transactions, will continue to remain free. Any future MDR will apply only to a limited category of merchant transactions above a prescribed threshold,” the Finance Minister said.Sitharaman had also highlighted the scale of India’s digital payments network, saying the country operates the world’s largest real-time payment system. In July 2026 alone, India processed 2,366 crore UPI transactions with a combined value of Rs 29.9 lakh crore.UPI is operated by the National Payments Corporation of India (NPCI), an initiative of the Reserve Bank of India (RBI) and the Indian Banks’ Association.The platform facilitates real-time transfers between individuals and also allows customers to make direct payments to merchants when purchasing goods and services. Its international reach has also expanded, with UPI now accepted in 11 countries. Uzbekistan is the latest country to join this list.The other countries where UPI is accepted are Singapore, the United Arab Emirates, France, Mauritius, Nepal, Bhutan, Qatar, Sri Lanka, Cambodia, and Greece.Since its launch on August 25, 2016, UPI has significantly reshaped India’s digital payments ecosystem. Its transaction value increased from Rs 0.07 lakh crore in FY17 to around Rs 314 lakh crore in FY26, representing a more than 4,000-fold rise over the decade.