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The National Payments Corporation of India (NPCI) has introduced a 0.4% Merchant Discount Rate (MDR) on select Person-to-Merchant (P2M) UPI transactions above Rs 2,000. The new framework will take effect from October 15, 2026. For transactions of Rs 75,000 and above, the MDR will be capped at Rs 300 per transaction. This means merchants will not pay more than Rs 300 even if 0.4% of the transaction value exceeds that amount. For example, a Rs 1 lakh transaction would attract Rs 400 at the 0.4% rate, but the MDR payable will be limited to Rs 300. UPI transactions of up to Rs 2,000 will continue to have zero MDR. According to NPCI's FAQ, such small-value transactions account for more than 95% of the total volume of UPI P2M transactions. The charges will apply to merchants and not consumers. Users will continue to make UPI payments free of charge, while UPI app providers will not be allowed to levy a platform fee or any other charge on UPI payments. Small vendors under the Person-to-Person Merchant (P2PM) framework will continue to be exempt from MDR. The framework covers small merchants receiving up to Rs 1 lakh per month through UPI QR codes directly into their accounts. For select merchant categories such as railways, telecom services, insurance and fuel, a flat MDR of Rs 5 per transaction will apply to payments above Rs 2,000 instead of the 0.4% rate. The framework also proposes a dedicated fund for small merchants to support digital payment infrastructure and merchant onboarding in Tier 3 to Tier 6 centres, including the Northeast, Jammu & Kashmir and Ladakh. The detailed framework is to be finalised in consultation with the Reserve Bank of India (RBI) within three months. NPCI said the MDR revenue will be distributed within the UPI ecosystem to support infrastructure resilience, innovation, cybersecurity and customer service. The FAQ said UPI's MDR remains lower than traditional card-based payment fees. Standard credit card MDRs typically range from 1.5% to 2.5%, while debit card MDRs are capped at up to 0.9%. Under the new structure, a Rs 3,000 transaction will attract Rs 12 MDR, while a Rs 50,000 transaction will attract Rs 200. Once the transaction value reaches Rs 75,000, the MDR is capped at Rs 300.
document fetched 2026-09-16 02:57