Published Sep 15, 2026 | 8:14 PM ⚊ Updated Sep 15, 2026 | 8:14 PM
Union Finance Minister Nirmala Sitharaman.
Synopsis: UPI payments above ₹2,000 to merchants will attract a 0.4 percent Merchant Discount Rate from 15 October, with the charge capped at ₹300 for transactions above ₹75,000. Person-to-person payments will remain free, while small merchants receiving up to ₹1 lakh a month through UPI QR payments will be exempt from MDR.
The Union government on Tuesday, 15 September, confirmed that UPI payments to merchants above ₹2,000 will attract a Merchant Discount Rate (MDR) from 15 October under the Payment and Settlement Systems Act, 2007, following detailed deliberations by the UPI Steering Committee.
A nominal MDR of 0.4 percent will apply to person-to-merchant (P2M) transactions above ₹2,000, with a cap of ₹300 for transactions exceeding ₹75,000.
A ₹5,000 transaction would potentially attract an MDR of ₹20, a ₹10,000 transaction ₹40, a ₹25,000 transaction ₹100, and a ₹50,000 transaction ₹200. MDR is typically borne by the receiver of the payment.
“MDR will be shared among payment ecosystem participants, including banks, payment service providers and UPI application providers,” the Centre said in a statement.
“Banks have been advised to ensure that merchants do not pass MDR charges on to customers. UPI application providers are expressly prohibited from imposing platform fees or hidden charges.”
No transaction fee, platform fee or other charge may be imposed on individuals for sending or receiving money through UPI, it said.
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The Centre said no charges will be levied on person-to-person (P2P) transactions, irrespective of the amount transacted. Separately, small merchants receiving up to ₹1 lakh a month through UPI QR payments under the Person-to-Person-Merchant (P2PM) category will not be subject to MDR.
A flat MDR of ₹5 will apply to transactions above ₹2,000 in railways, telecommunications, insurance, fuel and agricultural inputs. Mutual funds, securities, stockbrokers and dealers will attract an MDR of 0.02 percent, capped at ₹300.
Citing “data analysis”, the Centre said the new MDR will apply to only about 4 percent of merchant transactions and that “approximately 96 percent of merchant transactions will remain unaffected”.
The Centre said 5 percent of MDR collections will go into “a dedicated fund for small merchants”, which “will be established to support digital payment infrastructure in existing merchants and Tier 3 and smaller markets.”
