New Delhi, September 15: The National Payments Corporation of India (NPCI) has revised the Merchant Discount Rate (MDR) framework for select Unified Payments Interface (UPI) merchant transactions, introducing charges on certain payments above Rs 2,000 from October 15, 2026.
The revised framework is designed to support the sustainability and expansion of the UPI payment ecosystem while ensuring that small merchants and low-value transactions continue to benefit from zero MDR.
Importantly, UPI will remain free for consumers, with no transaction charges imposed on individuals making payments.
Under the revised framework, more than 95 per cent of low-value UPI Person-to-Merchant (P2M) transactions involving payments of up to Rs 2,000 will remain outside the MDR framework. This means consumers will continue to make everyday low-value UPI payments without additional charges.
For specified P2M transactions above Rs 2,000, an MDR of 0.4 per cent will apply, subject to a maximum charge of Rs 300 per transaction.
A separate flat MDR of Rs 5 per transaction will apply to UPI payments above Rs 2,000 in selected merchant categories. These include areas such as railways, telecom services, insurance and fuel.
Person-to-Person (P2P) UPI transactions will continue to remain free. Similarly, P2M transactions of up to Rs 2,000 will not attract MDR under the revised framework.
Small Merchants to Continue Receiving Zero MDR
The revised structure provides continued protection for small merchants operating under the Person-to-Person Merchant (P2PM) framework.
Small vendors receiving up to Rs 1 lakh per month through UPI QR payments directly into their bank accounts will continue to benefit from zero MDR. The measure is intended to support digital payment adoption among small retailers, street vendors and other businesses in the unorganised retail sector.
NPCI has also proposed a dedicated fund aimed at expanding UPI acceptance among small merchants. The initiative will focus particularly on strengthening existing merchant networks and expanding digital payment infrastructure in Tier-3 and smaller markets.
Supporting the UPI Ecosystem
The MDR collected from eligible higher-value transactions is expected to be distributed among various participants in the UPI ecosystem.
The framework is intended to help support investments in critical areas including payment infrastructure, cybersecurity, system resilience and technological innovation.
The changes are therefore aimed at creating a sustainable payment ecosystem while continuing to encourage wider UPI adoption among merchants and consumers.
With the revised framework coming into effect from October 15, 2026, the focus remains on balancing the long-term sustainability of India’s digital payments infrastructure with continued access to free UPI payments for consumers and protection for small merchants.