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New UPI MDR Framework Sets Merchant Fees From October 15
A new rule will change how some businesses pay for accepting UPI payments.
Starting October 15, 2026, most merchant payments above ₹2,000 will carry a small fee of 0.4%.
The business, not the customer, is expected to pay this fee.
Payments below ₹2,000 will not have this MDR.
Sending money to friends or family will also remain free.
Small vendors in the P2PM category receiving up to ₹1 lakh per month will continue to have zero MDR.
Very large payments will have a maximum fee of ₹300.
Some services, such as fuel, insurance, utilities, railways, and telecom, will use a flat ₹5 fee instead.
The money is intended to support UPI infrastructure, security, innovation, and small-merchant expansion.
From October 15, 2026, a 0.4% MDR will apply to most UPI person-to-merchant transactions above ₹2,000.
Transactions of ₹75,000 or more will have a maximum MDR of ₹300 per transaction.
Consumers, person-to-person transfers, and small P2PM merchants receiving up to ₹1 lakh monthly will remain free of MDR.
Railways, telecom, insurance, fuel, and certain utility payments above ₹2,000 will generally carry a flat ₹5 MDR.
Capital-market UPI payments will have a 0.02% MDR capped at ₹300, while a proposed fund will support small-merchant infrastructure.
- Who
- The framework affects UPI merchants, acquiring banks, payment aggregators, fintech applications, and other UPI ecosystem participants; consumers are not charged.
- What
- A new merchant discount rate framework for UPI payments, including standard, capped, flat-rate, and capital-market MDR categories.
- Where
- Across India's UPI payment ecosystem, including rural, semi-urban, and urban merchants.
- When
- The finalized provisions take effect on October 15, 2026; the small-merchant fund framework is expected to be finalized within three months.
- Why
- The stated objectives are to fund infrastructure, cybersecurity, innovation, customer service, and long-term sustainability while supporting small-merchant digital adoption.
Key facts
- Standard MDR
- 0.4% on most person-to-merchant UPI transactions above ₹2,000.
- High-value cap
- ₹300 maximum MDR for transactions of ₹75,000 or more.
- Consumer charges
- Consumers will continue using UPI without transaction or platform fees.
- P2P transfers
- Person-to-person and self-transfers remain free, regardless of permitted transaction amount.
- P2PM exemption
- Small merchants receiving up to ₹1 lakh per month through UPI QR codes remain at zero MDR.
- Specialized sectors
- Railways, telecom, insurance, fuel, and certain utilities will generally pay a flat ₹5 above ₹2,000.
- Capital markets
- Mutual funds, securities, brokers, dealers, and related platforms will pay 0.02%, capped at ₹300.
Sources
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