UPI Payments Above ₹2,000 to Attract 0.4% MDR From October 15

India’s Unified Payments Interface (UPI) payment ecosystem is set for a major change, with a new Merchant Discount Rate (MDR) framework coming into effect from October 15, 2026. Under the new framework, specified Person-to-Merchant (P2M) UPI transactions above ₹2,000 will attract an MDR of 0.4%, subject to a maximum charge of ₹300 per transaction.

The new charge will apply to the merchant side of the transaction, rather than directly to consumers. Payments of up to ₹2,000 to merchants will continue to remain free, while person-to-person (P2P) UPI transfers will remain completely free regardless of the transaction amount. The government has also stated that around 96% of P2M transactions will remain unaffected by the new framework.

For example, a ₹10,000 eligible merchant payment would attract an MDR of ₹40, while transactions of ₹75,000 or more would reach the ₹300 maximum. Certain categories, including selected essential services, have separate concessional charges under the framework.

The government says the framework is intended to support the long-term sustainability, infrastructure, security and expansion of the UPI ecosystem. The MDR is described as a fee within the payment ecosystem rather than a government tax, with the proceeds distributed among participating banks, payment service providers and other ecosystem participants.

What changes from October 15?

• P2P UPI payments: Remain free.
• Merchant payments up to ₹2,000: Remain free.
• Specified merchant payments above ₹2,000: 0.4% MDR.
• Maximum MDR: ₹300 per transaction.
• Consumer-facing UPI fee: Consumers are not required to pay the MDR directly.
• Effective date: October 15, 2026.

The new framework marks a significant change from the zero-MDR model that has supported UPI merchant payments for several years, while retaining free access for consumers and smaller transactions.