A 0.4% merchant discount rate will apply to specified UPI person-to-merchant payments above ₹2,000 from 15 October, while consumers, P2P transfers and small payments stay free.

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• The revised UPI framework takes effect on 15 October 2026 and applies to selected person-to-merchant (P2M) transactions.
• A 0.4% merchant discount rate (MDR) applies to P2M UPI payments above ₹2,000, capped at ₹300 for transactions of ₹75,000 and above.
• Certain merchant categories, including railways, telecom, insurance and fuel, will pay a flat ₹5 MDR on UPI payments above ₹2,000.
• UPI payments up to ₹2,000, which make up over 95% of P2M transaction volume, remain free of MDR.
• Person-to-person transfers stay outside the MDR framework, whatever the amount.
• Small merchants under the P2PM framework, receiving up to ₹1 lakh a month through UPI QR codes, keep zero MDR.
• The Finance Ministry has said MDR is a merchant-side charge that should not be passed on to consumers.
• NPCI released detailed FAQs on the framework on 15 September 2026, and the Department of Financial Services published its own FAQ document.
• A dedicated fund will support digital payment infrastructure for small merchants in Tier 3 and smaller markets, with its framework to be finalised with the RBI within three months.
• MDR on P2M UPI payments had been removed from January 2020, and an incentive scheme for low-value P2M transactions has operated since FY2021-22.
• The framework aims to give the UPI ecosystem its own revenue model and reduce dependence on continued government incentives.

Tags: UPIMDR, NPCI, DigitalPayments