Archive · 16 Sep 2026
Government Exempts Credit-Linked UPI Payments From New MDR
The government is changing fees for some large UPI payments made to merchants.
The new rules start on October 15.
Payments directly from a bank account to a merchant may cost a fee when they are above ₹2,000.
Most of these payments will have a 0.4% fee, with a maximum of ₹300.
Some railway, telecom, insurance and fuel payments will instead have a ₹5 fee.
Payments made using a credit card linked to UPI will not be covered by this new fee system.
More than 95% of person-to-merchant UPI payments are expected to stay free.
Some of the money collected will help small merchants accept UPI.
Credit card-linked UPI payments and bank-issued credit lines will be exempt from the new 0.4% MDR regime.
From October 15, certain direct account-to-merchant UPI payments above ₹2,000 will attract new fees.
Most eligible high-value merchant UPI transactions will face a 0.4% MDR, capped at ₹300.
Railway, telecom, insurance and fuel payments above ₹2,000 will carry a flat ₹5 MDR.
More than 95% of UPI person-to-merchant payments are expected to remain free, while 5% of MDR collections will support small merchants.
- Who
- The government, banks, merchants and UPI users are affected by the revised fee structure.
- What
- The government clarified that credit card-linked UPI payments are exempt from the new 0.4% Merchant Discount Rate.
- When
- The revised fee structure is scheduled to take effect on October 15.
- Where
- The changes apply to eligible UPI person-to-merchant payments in India.
- Why
- The framework introduces fees for certain high-value merchant payments while supporting UPI acceptance among small merchants.
- Credit-linked UPI payments
- RuPay credit cards linked to UPI and pre-sanctioned bank credit lines are exempt from the new MDR regime.
- General MDR
- A 0.4% MDR applies to certain direct bank-account-to-merchant-account UPI payments above ₹2,000.
- General MDR cap
- The 0.4% fee is capped at ₹300 per transaction.
- Flat-fee categories
- Railways, telecom services, insurance and fuel payments above ₹2,000 will attract a flat ₹5 MDR.
- Capital-market MDR
- Mutual funds, securities, stock brokers and dealers will have a 0.02% MDR, capped at ₹300.
- Expected coverage
- Around 4% of merchant transactions are expected to fall under the new MDR structure, while more than 95% of UPI person-to-merchant payments will remain without MDR.
- Small merchants
- Small merchants using the person-to-person merchant model will continue to receive zero MDR, and 5% of MDR collections will support expanded UPI acceptance.