Archive · 18 Sep 2026
India Plans Daily Monitoring of New UPI Merchant Fee
India is adding a fee to some large UPI payments made to businesses.
The new rule is scheduled to start on October 15, 2026.
It applies when someone pays a business more than Rs 2,000 through UPI.
Businesses are supposed to pay the fee instead of customers.
The fee is normally 0.4% and has a maximum of Rs 300 for payments of Rs 75,000 or more.
The government plans to check daily whether businesses try to make customers pay it.
Officials say only about 4% of UPI payments will be affected.
Some payments, such as person-to-person transfers, will remain free.
The government says the fee will help support and improve the digital-payments system.
A 0.4% MDR will begin October 15, 2026, on person-to-merchant UPI payments above Rs 2,000.
Merchants, not customers, must pay the fee, capped at Rs 300 for transactions of Rs 75,000 or more.
The government plans daily monitoring and is working with payment aggregators to prevent merchants from passing the charge to consumers.
Only about 4% of total UPI transaction volume is expected to be affected, according to officials.
Officials say the MDR will support a sustainable digital-payments revenue model and deny it was introduced because of US pressure.
- Who
- The central government, the Ministry of Finance, payment aggregators, merchants and other UPI ecosystem participants.
- What
- The government is introducing and monitoring a new Merchant Discount Rate on selected person-to-merchant UPI transactions.
- When
- The revised framework is scheduled to take effect on October 15, 2026; discussions were reported on September 18, 2026.
- Where
- Across India’s Unified Payments Interface ecosystem.
- Why
- Officials say the MDR is intended to create a sustainable revenue model for digital payments and support innovation while limiting costs for consumers.
Government Rationale
Merchant And Stakeholder Concerns
Who should bear the fee?
Government Rationale
The government says the MDR is a merchant-side cost and is preparing monitoring measures, while working with payment aggregators and merchant groups to prevent separate charges or higher prices for consumers.
Merchant And Stakeholder Concerns
Merchants have said they may pass the additional cost to consumers through higher prices or separate UPI charges, or may accept more cash payments.
Effect on digital payments
Government Rationale
Officials say only about 4% of UPI transaction volume will be affected, making a major shift to cash, inflationary impact or a significant decline in UPI use unlikely.
Merchant And Stakeholder Concerns
Critics and stakeholders fear that extra charges could raise costs for large UPI payments, encourage cash use and slow India’s digital-payments growth.
Reason for introducing MDR
Government Rationale
The government says the fee will create a sustainable revenue stream for banks, payment service providers and other UPI participants, and support innovation rather than relying entirely on subsidies.
Merchant And Stakeholder Concerns
The Department of Financial Services rejected claims of US pressure, but the issue arose after a 2026 United States Trade Representative report raised concerns about US electronic-payment providers’ participation in UPI credit transactions.
- Standard MDR
- 0.4% on applicable person-to-merchant UPI transactions
- Effective date
- October 15, 2026
- Transaction threshold
- Payments above Rs 2,000
- Fee cap
- Rs 300 for transactions of Rs 75,000 or more
- Monitoring plan
- The government plans to compare merchant pricing with earlier figures and monitor whether consumers are charged
- Expected affected volume
- Around 4% of total UPI transaction volume
- Tax treatment
- The MDR attracts 18% GST; eligible businesses may claim input tax credit
- Exemptions and special rates
- Person-to-person payments remain free; RuPay debit card payments remain free; specified railway, telecom, insurance and fuel payments above Rs 2,000 carry a flat Rs 5 charge
Sources
Govt Plans Measures To Prevent Merchants Passing UPI MDR Charges To Consumers
Centre plans daily tracking to see if merchants charge consumers for UPI fee
Ahead of Oct 15 UPI Rollout, Govt Moves To Ensure Merchants Don’t Pass MDR to Consumers
