Archive · 25 Sep 2026
New UPI MDR Applies to Select Merchant Payments
A new rule will add a fee to some UPI payments made to businesses.
The fee applies when the payment is above Rs 2,000 and begins on October 15.
The shop or business will pay the fee, not the customer.
The money will not go to the government.
Instead, it will be shared by banks, payment gateways and UPI apps that help process the payment.
Sending money to another person will still be free.
Payments to merchants up to Rs 2,000 will also remain free.
Most UPI merchant payments, about 96%, are expected to avoid the fee.
A 0.4% MDR will apply from October 15 to specified person-to-merchant UPI payments above Rs 2,000.
Merchants, not customers, will pay the charge, and the money will stay within the payments ecosystem.
MDR revenue will be divided among the customer’s bank, payment gateways, UPI apps and sponsoring banks.
Person-to-person payments and person-to-merchant payments up to Rs 2,000 will remain free.
Around 96% of UPI merchant transactions are expected to remain outside the MDR framework.
- Who
- Merchants and participants in the UPI payments ecosystem; Finance Minister Nirmala Sitharaman explained the framework.
- What
- A 0.4% merchant discount rate will apply to specified person-to-merchant UPI transactions above Rs 2,000.
- When
- The framework takes effect on October 15.
- Where
- Within India's UPI payments ecosystem.
- Why
- To create a revenue mechanism for entities involved in processing digital payments while keeping customers from paying a separate MDR charge.
- Standard MDR
- 0.4% for specified merchant transactions above Rs 2,000.
- MDR cap
- Rs 300 for transactions of Rs 75,000 and above.
- Payer
- The merchant will bear the MDR; it will not be charged separately to the customer.
- Revenue distribution
- 40% to the customer’s bank, 30% to payment gateways, 20% to the UPI application and 10% to the sponsoring bank.
- Exempt transactions
- Person-to-person payments and person-to-merchant payments up to Rs 2,000 remain outside the framework.
- Small merchants
- Merchants receiving up to Rs 1 lakh monthly through UPI QR codes under the P2PM category will continue to receive zero-MDR treatment.
- Special rates
- Essential services face a flat Rs 5 MDR above Rs 2,000, while mutual funds, securities, brokers and dealers face 0.02%, capped at Rs 300.