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UPI MDR Rules Keep Customers Free, Target Merchant Payments
UPI is a way to send money from one bank account to another.
Sending money to friends or family will still be free.
Paying a shop may involve a new fee when the payment is more than ₹2,000.
This fee is called MDR and is normally paid within the merchant payment system.
Customers are not supposed to pay it directly.
For most eligible merchant payments, the rate is 0.4%, with a maximum charge of ₹300.
Small vendors and several essential services have special protections or lower charges.
The articles say that around 96% of merchant payments will not be affected.
The plan is meant to help support the costs of operating and expanding the UPI system.
Person-to-person UPI transfers will remain free regardless of transaction amount.
Eligible person-to-merchant payments above ₹2,000 will generally carry a 0.4% MDR paid within the merchant ecosystem.
The MDR will be capped at ₹300 for transactions of ₹75,000 or more.
Small merchants receiving up to ₹1 lakh monthly through eligible UPI QR payments will remain exempt.
Railways, telecom, insurance and fuel payments above ₹2,000 will attract a flat ₹5 MDR, while about 96% of merchant transactions are expected to remain unaffected.
- Who
- The government and the National Payments Corporation of India announced the revised framework; merchants pay applicable MDR within the payment ecosystem.
- What
- A merchant discount rate of 0.4% will apply to specified UPI merchant payments above ₹2,000, while customers and person-to-person users remain free of transaction charges.
- Where
- The rules apply to eligible Unified Payments Interface transactions in the merchant payment ecosystem.
- When
- The framework was announced on September 15, 2026, according to one article.
- Why
- The framework is intended to create revenue for the UPI ecosystem, support resilience and cybersecurity, and encourage continued adoption while keeping person-to-person payments free.
Customer Protection
Merchant Cost Concern
Who bears the charge?
Customer Protection
The government and payment authorities say customers will not be charged MDR, and banks have been advised to prevent merchants from passing it on.
Merchant Cost Concern
The MDR is still a cost for merchants, and one article notes that businesses can sometimes add digital-payment processing costs to customer bills, although that practice is prohibited for these UPI charges.
Purpose of the framework
Customer Protection
Supporters present the framework as a way to make UPI financially sustainable and fund expansion, resilience, cybersecurity and innovation.
Merchant Cost Concern
Businesses subject to MDR may face higher payment-processing costs on qualifying transactions, particularly where the 0.4% rate applies.
Key facts
- Person-to-person payments
- Remain free regardless of transaction amount.
- Standard MDR
- 0.4% on specified person-to-merchant payments above ₹2,000.
- MDR cap
- ₹300 per transaction for payments of ₹75,000 or more.
- Small-merchant exemption
- Eligible merchants receiving up to ₹1 lakh monthly through UPI QR payments remain exempt.
- Special-sector rate
- Railways, telecom, insurance and fuel payments above ₹2,000 attract a flat ₹5 MDR.
- Capital-market rate
- Mutual funds, securities, stockbrokers and dealers attract 0.02% MDR, capped at ₹300.
- Expected reach
- MDR is estimated to apply to about 4% of merchant transactions, leaving approximately 96% unaffected.
Sources
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