- September 16, 2026
UPI Charges From October 15: Who Pays, How Much And What Stays Free?
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UPI MDR charges: Check the new 0.4% MDR above Rs 2,000 digital payments, Rs 300 cap, exemptions, small merchant rules and what it means for customers.
UPI MDR Charges From October 15: 0.4% Above Rs 2,000, Rs 300 Cap; All You Need To Know.
UPI MDR charges: The National Payments Corporation of India (NPCI) on Tuesday released a detailed FAQ on the new Merchant Discount Rate (MDR) framework for select UPI transactions, clarifying the charges that will apply to merchants and what will remain free for consumers.
Under the framework, a 0.4% MDR will apply to person-to-merchant (P2M) UPI transactions above Rs 2,000, while transactions of Rs 75,000 and above will have an MDR cap of Rs 300 per transaction. The new framework will take effect from October 15, 2026.
Consumers will not be charged for making UPI payments. Person-to-Person (P2P) transfers will also remain free.
Here is what the new UPI MDR framework means for consumers, merchants and different categories of payments.
What are the new UPI MDR charges?
MDR, or Merchant Discount Rate, is the charge associated with processing a payment accepted by a merchant. Under the new framework, a 0.4% MDR will apply to P2M UPI transactions above Rs 2,000. For transactions of Rs 75,000 and above, the MDR will be capped at Rs 300 per transaction.
When will the new UPI MDR rules take effect?
The revised MDR framework and threshold structure will come into effect from October 15, 2026. The timeline gives acquiring banks, payment aggregators, fintech applications and corporate accounting platforms time to update their software and billing systems.
Will customers be charged for making UPI payments?
No. UPI will remain free for consumers. The MDR is applicable within the merchant payment ecosystem and does not create a transaction fee for the customer making the UPI payment.
“MDR is a charge within the merchant payment ecosystem. It is not a charge on customers making UPI payments. Banks have been advised to ensure that merchants do not pass MDR charges on to customers. UPI application providers are expressly prohibited from imposing platform fees or hidden charges,” the finance ministry said in a statement on Tuesday.
Will P2P UPI transfers attract any charge?
No. Person-to-person (P2P) UPI transactions will remain free for both the payer and beneficiary. This includes transfers to family and friends, splitting bills and transfers between a user’s own linked bank accounts.
Will UPI apps charge a platform fee?
No. UPI application providers will not be allowed to charge a platform fee or any other charge for payments made through UPI.
Are UPI transactions up to Rs 2,000 exempt from MDR?
Yes. UPI P2M transactions up to Rs 2,000 will not be affected by the new MDR framework. The NPCI said these small-value transactions account for more than 95% of the total volume of UPI P2M transactions.
How much MDR will a merchant pay on a Rs 3,000 or a Rs 50,000 UPI payment?
At an MDR rate of 0.4%, a merchant accepting a Rs 3,000 UPI payment will pay Rs 12 as MDR. For a Rs 50,000 transaction, the MDR at the same rate would be Rs 200.
What happens to MDR on a Rs 1 lakh UPI payment?
A 0.4% charge on Rs 1 lakh would work out to Rs 400. However, the MDR is capped at Rs 300 for transactions of Rs 75,000 and above. Therefore, the MDR on a Rs 1 lakh transaction will be Rs 300.
What is the MDR structure?
| UPI transaction value | MDR |
|---|---|
| Up to Rs 2,000 | 0% |
| Rs 3,000 | 0.4% = Rs 12 |
| Rs 50,000 | 0.4% = Rs 200 |
| Rs 75,000 and above | Capped at Rs 300 |
Will small local vendors have to pay MDR?
Small merchants operating under the P2PM framework will continue to have zero MDR. The P2PM category covers small vendors receiving up to Rs 1 lakh per month through UPI QR directly into their accounts.
The finance ministry in its statement said, “Small merchants including street vendors receiving up to ₹1 lakh per month through UPI QR codes under the Person-to-Person-Merchant (P2PM) category will continue to enjoy zero MDR on all transactions. This provision will protect street vendors, neighbourhood shops and other small businesses from additional payment costs.”
What is P2PM?
P2PM, or Person-to-Person Merchant, is a specialised account category created to support small vendors receiving payments directly into their personal bank accounts. Under the framework, small merchants receiving up to Rs 1 lakh per month through UPI QR codes under the P2PM category enjoy zero MDR.
What happens if a P2PM merchant receives a payment above Rs 2,000?
A payment above Rs 2,000 does not automatically make the transaction liable for MDR if the merchant falls under an exempt P2PM category. NPCI says MDR applicability is determined by the overall categorisation of the merchant account.
When does a P2PM merchant move to the P2M category?
A merchant receiving more than Rs 1 lakh in UPI payments for three consecutive months will be formally transitioned to the P2M category, according to the NPCI FAQ. Acquiring banks and payment service providers will monitor the inward transaction threshold.
Do small merchants need to change their existing UPI QR codes?
No. Existing UPI QR codes will continue to function. Merchants do not need to replace or re-register their existing QR codes, physical QR stands or soundboxes because of the new MDR framework.
Is GST registration necessary for small merchants to qualify for zero MDR?
No. GST registration is not required for a small merchant to qualify for zero MDR protection under the P2PM category. Eligibility is determined by the monthly collection threshold and bank-account categorisation.
Does zero MDR apply to P2PM merchants in rural areas?
Yes. P2PM merchants in rural and semi-urban areas will also qualify for zero MDR. The framework also proposes a dedicated fund to support digital payment infrastructure and merchant onboarding, particularly in rural areas and smaller centres.
What is the proposed fund for small merchants?
A dedicated fund will be established to subsidise and accelerate digital payment infrastructure in Tier 3 to Tier 6 centres, including the Northeast, Jammu & Kashmir and Ladakh.
In Tier 1 and Tier 2 centres, notified Central government schemes such as PM SVANidhi and PM Vishwakarma will also be included. The fund will provide financial assistance for merchant onboarding and incentivise UPI transaction growth among small merchants.
The detailed framework will be finalised in consultation with the Reserve Bank of India within the next three months.
“A dedicated fund will be established to promote UPI adoption among small merchants. An amount equivalent to 5% of total MDR collections will be contributed to this fund. The fund will support wider UPI acceptance, sustained usage and the inclusion of small businesses in India’s digital payments ecosystem,” the ministry stated.
Which sectors will have a flat Rs 5 MDR?
Certain merchant categories, including railways, telecom services, insurance and fuel, among others, will have a flat Rs 5 MDR for transactions above Rs 2,000 instead of the standard 0.4% rate.
What MDR will apply to insurance premium payments?
Insurance premium payments above Rs 2,000 will attract a flat Rs 5 MDR per transaction, instead of the 0.4% rate.
What happens to UPI payments at petrol pumps?
Fuel purchases above Rs 2,000 will attract a flat Rs 5 MDR. Fuel payments below Rs 2,000 will have zero MDR.
Will electricity, water and gas bill payments attract 0.4% MDR?
No. Designated public utility payments, including electricity, municipal water charges and piped natural gas, will attract a flat Rs 5 MDR on payments above Rs 2,000. Utility transactions below Rs 2,000 will carry zero MDR.
What about school and college fee payments?
Educational fee collections, including school tuition, university fees and institutional entrance examinations, fall under the designated industry programme category. Transactions up to Rs 2,000 remain free of MDR, while transactions above Rs 2,000 will benefit from flat-fee structures or capped processing rates.
What MDR will apply to mutual funds and stock-market transactions?
Capital-market transactions will have a separate MDR of 0.02% of the transaction value, capped at Rs 300. The lower rate applies to payments involving mutual funds, securities, stockbrokers and dealers.
Which capital-market payments are covered?
The capital-market MDR framework covers regulated entities including asset management companies, SEBI-registered stockbrokers, securities dealers and investment platforms. It applies to UPI payments for equity purchases, debt-market investments, mutual fund purchases and broker wallet top-ups.
Does the new MDR apply to RuPay credit cards linked to UPI?
The MDR framework applies specifically to direct user-account-to-merchant-account UPI transactions. Credit-linked UPI payments, including RuPay credit cards linked to UPI and pre-sanctioned bank credit lines, operate under separate credit-product rules.
Will UPI AutoPay transactions attract MDR?
No. Automated recurring payments made through UPI Mandates or AutoPay will not carry prescribed MDR transaction charges under this framework. This includes recurring utility payments, OTT subscriptions and recurring investments.
“Payments set up using automated recurring transfers for monthly utility bills, OTT streaming subscriptions, all recurring investments etc. will not pay any prescribed MDR charge for the transaction,” according to the NPCI FAQs.
Is there a monthly limit on free UPI transactions for consumers?
No. There are no monthly quotas, volume limits or tiered commercial caps on free UPI transactions for individual consumers. Banks and NPCI may impose normal daily security or transaction-value limits for risk-management purposes, but these are not commercial charges.
Why is MDR being introduced?
The NPCI said MDR revenue will remain within the UPI ecosystem and be used to support investments in infrastructure resilience, innovation, cybersecurity and customer service. The NPCI FAQ says UPI’s scale requires continued investment and that a commercial, threshold-based model can provide more reliable funding for technology and infrastructure.
According to the NPCI FAQ, UPI processed 2,451 crore transactions worth Rs 29.9 lakh crore in August 2026.
How does UPI MDR compare with card charges?
NPCI says the UPI MDR is significantly lower than traditional card-based payment fees. The FAQ cites typical credit-card MDRs of 1.5%-2.5%, while debit-card MDRs are capped at up to 0.90%.
Quick Answers
Ask News18The new UPI Merchant Discount Rate (MDR) framework will take effect on October 15, 2026. Under this framework, consumers will not be charged for making UPI payments, and Person-to-Person (P2P) transfers will remain completely free. The MDR is a charge applicable strictly within the merchant payment ecosystem, meaning merchants will pay the fee while UPI transactions remain free for customers.
Ask News18About the Author
Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to personal finance, markets, economy and companies. Having over a decade of experience in financial journalis…Read More
September 15, 2026, 20:01 IST
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