Published on Sept 18, 2026Updated on Sept 21, 2026
From 15 October 2026, a new framework for UPI charges 2026 will come into effect, changing how certain merchant payments are handled. For consumers, UPI transaction charges will not apply when they make payments, so using UPI will continue to remain free. Under the new UPI rule, MDR (Merchant Discount Rate) will apply to eligible merchant transactions exceeding Rs. 2,000. These UPI payment charges are payable by eligible merchants rather than customers.
However, data analysis indicates that the MDR or UPI transaction charges in 2026 will apply to only about 4% of merchant transactions. Around 96% will remain unaffected, either because they fall below Rs. 2,000 or qualify for the zero-MDR framework for small merchants.
The framework introducing UPI charges above Rs. 2,000 is intended to support the long-term sustainability of the UPI ecosystem while enabling continued investment in payment security, infrastructure resiliency, and innovation.
The new UPI MDR policy introduces a Merchant Discount Rate on certain person-to-merchant (P2M) payments above Rs. 2,000. The framework keeps most UPI merchant transactions outside the MDR while creating a source of revenue for continued investment in the infrastructure, cybersecurity, and services that support the UPI ecosystem.
UPI had operated under a zero-MDR framework since January 2020. In June 2025, the Finance Ministry dismissed reports that MDR would be introduced on UPI transactions.
By August 2026, RBI Governor Sanjay Malhotra described discussions about UPI charges as "premature", while acknowledging the costs involved in providing payment services.
The position was formally settled on 15 September 2026, when the government announced the new MDR framework for select merchant transactions, with the changes taking effect from 15 October 2026.
UPI now processes billions of transactions each month, requiring continued investment to keep the payment system reliable and secure. The UPI new charges are intended to help support this ecosystem while keeping the charges on UPI transactions limited to eligible merchant payments above Rs. 2,000.
The UPI MDR charges for merchants are intended to support investment in:
The new UPI rules in October 2026 will take effect from the 15th. From this date, the UPI MDR rate 2026 will apply to eligible person-to-merchant (P2M) transactions above Rs. 2,000, while payments made by consumers will continue to remain free of transaction charges.
Eligible person-to-merchant (P2M) transactions above Rs. 2,000 will attract UPI MDR charges of 0.4% of the transaction value. The UPI Rs. 300 MDR cap is applied to transactions of Rs. 75,000 and above, so the MDR will not increase beyond Rs. 300 for higher transaction values.
The new UPI MDR charges for merchants are lower than the rates generally associated with card-based payments. For UPI transactions above Rs. 2,000, the MDR is 0.4%, capped at Rs. 300 for high-value transactions.
By comparison, standard credit card MDRs usually range from 1.5% to 2.5% per transaction, and debit card MDRs are capped at 0.90%. This makes UPI payment processing charges comparatively lower for eligible merchants accepting digital payments.
|
Payment Method |
MDR |
|
UPI |
0.4% on transactions above Rs. 2,000, capped at Rs. 300 for transactions of Rs. 75,000 and above |
|
Credit card |
Typically 1.5% to 2.5% per transaction |
|
Debit card |
Capped up to 0.90% |
The MDR collected within the UPI ecosystem is intended to support the systems and services required to process a growing volume of digital payments. The revenue can contribute to continued investment across several areas, including:
For consumers, the new MDR framework does not introduce a fee for making UPI payments. Customers can continue to use UPI without paying transaction charges, including when paying merchants, as the applicable MDR is borne within the merchant payment ecosystem.
No. Consumers can continue making UPI payments without paying transaction charges under the new MDR framework.
The UPI charges above Rs. 2,000 apply to eligible merchant transactions and are not charged to the customer making the payment. This means consumers can continue using UPI for purchases, bill payments, and other eligible transactions without an MDR being added to the amount they pay.
Yes. The new UPI charges do not apply to person-to-person (P2P) transfers. Individuals can continue sending money to one another through UPI without paying transaction charges, irrespective of the amount transferred. This includes:
No. UPI app providers will not be permitted to levy a platform fee or any other charge on payments made through UPI. Consumers can therefore continue using UPI apps for payments without paying an additional fee to the app provider for processing the transaction.
No. Customers will not have to pay an additional charge when they scan a UPI QR code to make a payment. Where MDR applies to an eligible merchant transaction, it is borne within the merchant payment ecosystem and is not added as a transaction fee for the customer.
No commercial monthly quota has been introduced for free UPI transactions under the new MDR framework. Consumers can continue making UPI payments without being charged based on the number of transactions completed during a month. However, this does not change the existing transaction limits and security controls set by NPCI, banks, and payment service providers. These may restrict the amount or number of transactions permitted within a particular period for security, risk management, or operational reasons.
No. The new MDR framework does not prescribe MDR charges for UPI Mandates or AutoPay standing instructions. This means recurring payments set up through these facilities, such as utility bills, OTT subscriptions, and mutual fund SIPs, will not attract the newly introduced UPI MDR charges. Consumers can continue using these UPI-based recurring payment arrangements without an MDR being added under the new framework.
UPI rules can change over time, so it is best to check official sources when looking for the latest information. Consumers can refer to:
Not necessarily. Merchants generally absorb small payment-processing costs as part of doing business rather than changing prices for each payment method. The 0.4% UPI MDR is also lower than typical credit card MDR. Under the new framework, merchants cannot pass on MDR on UPI to consumers while accepting UPI payments, so you should not see an additional fee at checkout.
Small merchants receive specific protection under the new MDR framework. Person-to-Person-Merchant or P2PM UPI merchant charges will not apply where eligible QR-based UPI collections remain within the prescribed monthly threshold. This means many smaller businesses can continue accepting digital payments without UPI merchant charges, even when individual transactions exceed Rs. 2,000.
The Person-to-Person-Merchant (P2PM) framework is designed for small merchants who receive business payments directly into their personal bank accounts through UPI QR codes. Under this category, eligible merchants receiving up to Rs. 1 lakh per month through UPI QR payments continue to have zero MDR. As a result, UPI charges for small merchants within the prescribed limit remain nil, helping street vendors and other micro-businesses accept digital payments without an MDR cost.
Eligible small merchants covered under the P2PM framework will continue to receive zero-MDR treatment. The UPI zero MDR for small merchants provision applies when they receive up to Rs. 1 lakh per month through UPI QR codes. This means an individual payment above Rs. 2,000 does not by itself result in MDR, provided the merchant continues to meet the requirements of the P2PM category.
No. Small merchants do not need to replace their existing UPI QR codes because of the new MDR framework. The current QR infrastructure can continue to be used for receiving payments. Any applicable MDR treatment will depend on the merchant's category and transaction activity, rather than requiring a new QR code.
A payment above Rs. 2,000 does not directly require a small merchant to pay MDR. What counts is how the merchant is categorised under the UPI framework. Eligible P2PM merchants can continue to receive zero-MDR treatment if their UPI QR collections remain within the prescribed monthly limit of Rs. 1 lakh. Therefore, a single transaction exceeding Rs. 2,000 can still remain free of MDR when the merchant qualifies for the P2PM category.
No. GST registration is not required for a merchant to qualify for zero MDR under the P2PM framework. Eligibility is based on the merchant's bank account categorisation and monthly UPI QR collections of up to Rs. 1 lakh. A merchant's GST registration status does not determine whether the zero-MDR provision applies.
Acquiring banks monitor the UPI payments received by accounts categorised as P2PM merchants. The Rs. 1 lakh monthly inward UPI credit threshold helps determine whether a merchant continues to qualify for zero MDR or moves to the standard P2M category.
Yes, eligible small merchants in rural and semi-urban areas can benefit from the UPI zero MDR for small merchants provision. However, note that eligibility is not based on where the business operates. Merchants must meet the requirements of the P2PM framework, including the prescribed monthly UPI collection threshold and bank account categorisation. This allows qualifying small merchants across different locations to continue accepting UPI payments without MDR.
A dedicated fund is proposed to support the expansion of digital payments among small merchants. It will help subsidise payment infrastructure and provide financial assistance for merchant onboarding and increased UPI usage. The detailed framework for the fund is expected to be finalised in consultation with the RBI within three months.
The fund is intended to support:
The new MDR framework also covers eligible payments made to larger businesses, including e-commerce platforms. UPI charges for large merchants will apply to qualifying P2M transactions above Rs. 2,000, subject to the prescribed MDR rate and cap for higher-value transactions.
For larger commercial merchants, the standard UPI MDR is 0.4% on eligible P2M transactions above Rs. 2,000, subject to the applicable cap on higher-value transactions. Transactions of Rs. 2,000 or less will continue to have zero MDR.
Yes. The MDR on an eligible UPI merchant transaction is capped at Rs. 300. At the standard rate of 0.4%, this cap is reached when the transaction value is Rs. 75,000. For payments above Rs. 75,000, the MDR will remain Rs. 300 rather than continuing to increase with the transaction amount.
For eligible P2M payments above Rs. 2,000, the Merchant Discount Rate on UPI is calculated at 0.4% of the transaction value, with a maximum charge of Rs. 300 on UPI payments of Rs. 75,000 and above. Transactions up to Rs. 2,000 remain at zero MDR.
The examples below show how the UPI MDR charges work at different transaction values.
|
Transaction Value |
MDR Calculation |
MDR Payable |
|
Rs. 2,000 |
Zero MDR |
Rs. 0 |
|
Rs. 3,000 |
0.4% of Rs. 3,000 |
Rs. 12 |
|
Rs. 50,000 |
0.4% of Rs. 50,000 |
Rs. 200 |
|
Rs. 75,000 |
Capped at Rs. 300 |
Rs. 300 |
|
Rs. 1 lakh |
Capped at Rs. 300 |
Rs. 300 |
No. Merchants cannot pass the applicable MDR to customers as a separate charge on a UPI payment. The MDR is a merchant-side cost that is distributed within the UPI ecosystem. Customers should not see an additional MDR amount added to their bill simply because they choose UPI as their payment method.
Capital market payments made through UPI will follow a separate MDR structure from standard merchant transactions. A lower rate applies to eligible payments in this category, tailored to the different nature and value of transactions carried out through capital market platforms.
Capital market transactions made through UPI, including payments made towards mutual funds, securities, stockbrokers, and dealers, will attract an MDR of 0.02% of the transaction value. The charge is capped at Rs. 300 per transaction, so the MDR will not exceed this amount even when the value of the eligible transaction is higher.
The capital market MDR framework applies to regulated entities that accept eligible UPI payments for investment-related transactions. This includes payments for mutual fund purchases, equity investments, and other covered capital market activities. Entities under the framework include:
Not every eligible merchant payment will follow the standard 0.4% MDR. The new framework provides separate rates for certain industries and transaction categories, taking into account the nature of these payments and the sectors in which they are made.
Yes. Insurance premium payments made through UPI are covered by a special flat-rate MDR. For payments above Rs. 2,000, an MDR of Rs. 5 per transaction will apply instead of the standard percentage-based rate. This keeps the MDR fixed even when the value of the insurance premium is higher.
Fuel purchases made through UPI will have a flat MDR of Rs. 5 for payments above Rs. 2,000. This concessional rate helps petrol pump operators keep processing costs low on higher-value refuelling transactions. Payments of Rs. 2,000 or less will continue to have zero MDR, keeping routine fuel purchases outside the charge.
Yes. Eligible utility bill payments made through UPI will attract a flat MDR of Rs. 5 when the transaction exceeds Rs. 2,000. This includes payments for services such as electricity, municipal water, and piped natural gas. Payments of Rs. 2,000 or less will continue to carry zero MDR, helping keep routine utility collections free from processing charges.
Educational fee payments made through UPI are covered under a designated Industry program category. This includes payments such as school tuition fees, university term fees, and institutional entrance examination charges. Transactions above Rs. 2,000 receive flat-fee or capped MDR treatment rather than high percentage-based rates on large amounts. Payments of Rs. 2,000 or less will continue to have zero MDR.
Certain sectors have been given a concessional MDR instead of the standard 0.4% rate. For UPI payments above Rs. 2,000, railways, telecom services, insurance, and fuel purchases will attract a flat MDR of Rs. 5 per transaction. Payments up to Rs. 2,000 will continue to have zero MDR.
|
Sector |
MDR Above Rs. 2,000 |
|
Railways |
Rs. 5 per transaction |
|
Telecom services |
Rs. 5 per transaction |
|
Insurance |
Rs. 5 per transaction |
|
Fuel |
Rs. 5 per transaction |
The new UPI MDR framework should not be confused with other costs that may already apply to certain UPI-linked services. The October 2026 rules specifically cover eligible P2M transactions. Other charges, including some payment gateway fees, are set separately and are not part of the UPI MDR framework.
Yes, but these are pre-existing charges and are separate from the new MDR framework effective from 15 October 2026. RuPay Credit Card-linked UPI payments can carry merchant charges of roughly 1.1% to 2%, depending on factors such as the merchant category. Wallet- or PPI-funded UPI payments above Rs. 2,000 can also attract a separate interchange fee.
|
UPI Payment Type |
Treatment |
|
RuPay Credit Card-linked UPI |
Roughly 1.1% to 2% merchant charge may apply |
|
Wallet/PPI-funded UPI above Rs. 2,000 |
Interchange of 0.5% to 1.1% |
|
Direct bank-account P2M UPI from 15 October 2026 |
New 0.4% MDR applies to transactions above Rs. 2,000, with a Rs. 300 cap on transactions of Rs. 75,000 and above |
The first two charges existed before the October 2026 change and should not be confused with the new MDR framework on P2M UPI payments.
No. MDR and platform fees are separate charges. Under the new framework, the standard UPI MDR is 0.4% on eligible merchant transactions and is distributed within the payment ecosystem. Payment gateways or apps may separately charge merchants for services such as payment dashboards, reconciliation, fraud protection, and reporting. A merchant may therefore see both types of charges, even where the UPI MDR is zero or capped.
|
Charge |
What It Covers |
|
UPI MDR |
Processing eligible payments through the UPI ecosystem |
|
Platform fee |
Additional services provided by the payment gateway or app |
Yes. The MDR paid on eligible UPI transactions will attract 18% GST, adding to the merchant's payment-processing cost. However, businesses registered under GST can claim Input Tax Credit (ITC) on the GST portion of the MDR paid, subject to prevailing rules. Unregistered merchants will not have this option and may have to bear the additional GST cost themselves.
For businesses in non-exempt categories, the new MDR introduces an additional cost on eligible UPI payments above Rs. 2,000. Since this cost cannot be passed directly to customers, businesses may need to:
Where additional funding is needed to maintain this cushion, a dedicated business loan can help enterprises manage short-term working capital requirements.
The new UPI rule changes how certain person-to-merchant (P2M) payments above Rs. 2,000 are processed, while UPI remains free for consumers and most merchant transactions remain outside the MDR framework. The impact of UPI MDR on businesses will vary by merchant category, transaction value, and applicable exemptions. Businesses should therefore understand where UPI payment charges apply and account for these costs when planning their cash flow.
For businesses that need additional funds for day-to-day expenses or growth initiatives as they adjust to the new UPI framework, SMFG India Credit offers unsecured business loans of up to Rs. 1 crore* at competitive interest rates.
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Yes. Consumers can continue making UPI payments without paying transaction charges. The new MDR applies to eligible merchant transactions and is not charged to the customer, including when the value of a purchase exceeds Rs. 2,000.
Yes. Person-to-Person UPI transfers will remain free under the new framework. This includes money sent from one individual to another as well as transfers between a person’s own bank accounts using UPI.
No. Scanning a merchant’s UPI QR code does not result in an additional charge for the customer. Where MDR applies to the transaction, it is a merchant-side cost and cannot be added separately to the customer’s payment.
No. UPI app providers will not charge consumers a platform fee for making UPI payments under the new framework. Customers can continue using their UPI apps without an additional platform charge being added to each payment.
There is no new commercial monthly quota on free UPI transactions for consumers. However, existing limits set by NPCI, banks, or payment service providers for security, risk management, or operational purposes may still apply separately.
No prescribed MDR applies to UPI Mandates or AutoPay standing instructions under the new framework. Recurring payments set up for purposes such as utility bills, OTT subscriptions, and mutual fund SIPs therefore remain outside the new MDR structure.
Not necessarily. Merchants cannot add MDR as a separate surcharge to a customer’s UPI payment and may absorb such processing costs as part of their business expenses rather than directly increasing prices because of MDR.
No. MDR is a payment-processing charge within the UPI merchant ecosystem. A platform or convenience fee charged separately by an app or payment service is a different type of charge and should not be treated as MDR.
Consumers can check the Department of Financial Services, Reserve Bank of India, and NPCI websites for official announcements, regulatory updates, FAQs, and other information about UPI policies.
Merchant Discount Rate, or MDR, is a payment-processing charge associated with eligible merchant transactions. Under the new framework, it is distributed within the UPI ecosystem to support infrastructure, cybersecurity, innovation, and customer service.
Eligible merchants bear the MDR rather than customers making the payment. The UPI MDR charges for merchants therefore form part of the business’s payment-processing costs and cannot be passed to customers as a separate surcharge.
P2M UPI transactions above Rs. 2,000 will generally attract MDR at 0.4% of the transaction value. This is subject to a maximum charge of Rs. 300 on transactions of Rs. 75,000 and above, while certain merchant categories have separate rates.
Yes. The standard UPI MDR is capped at Rs. 300 on transactions of Rs. 75,000 and above.
The standard UPI MDR of 0.4% is lower than typical credit card MDRs of around 1.5% to 2.5% and the debit card MDR cap of 0.90%.
No. Merchants cannot add the MDR as a separate charge to the amount a customer pays through UPI. Where MDR applies, it remains a merchant-side payment-processing cost rather than a surcharge payable by the customer.
Eligible P2PM merchants can continue receiving UPI QR payments at zero MDR when their monthly inward UPI collections remain within Rs. 1 lakh. A single transaction above Rs. 2,000 does not automatically trigger MDR.
No. GST registration is not a requirement for zero-MDR eligibility under the P2PM framework. Eligibility depends on the merchant’s bank account categorisation and monthly UPI collections rather than whether the business is registered under GST.
No. Existing UPI QR infrastructure can continue to be used after the new MDR framework takes effect. Small merchants do not need to replace their QR codes or soundboxes simply because the MDR rules have changed.
Banks monitor inward UPI credits for P2PM-classified accounts. Merchants receiving more than Rs. 1 lakh per month for three consecutive months are moved from the P2PM category to the standard P2M category.
Yes, provided they meet the P2PM eligibility requirements. Geography alone does not determine zero-MDR status, so qualifying small merchants in rural, semi-urban, and other locations receive the same treatment under the framework.
The proposed fund will support digital payment infrastructure and merchant onboarding, particularly in specified regions and under notified government schemes. Its detailed framework is expected to be finalised in consultation with the RBI within three months.
Eligible P2M payments above Rs. 2,000 to large merchants and e-commerce businesses generally attract the standard MDR of 0.4%, capped at Rs. 300 on higher-value UPI payments. Payments up to Rs. 2,000 continue to have zero MDR.
Eligible UPI payments above Rs. 2,000 in insurance, fuel, telecom, railways, and specified utilities attract a concessional flat MDR of Rs. 5 per transaction instead of the standard 0.4% rate.
UPI payments for mutual funds, securities, and other covered capital market transactions attract MDR at 0.02% of the transaction value. The charge is capped at Rs. 300 for each eligible transaction.
Such payments can already carry separate merchant or interchange charges. These pre-existing charges are governed separately and should not be confused with the new October 2026 MDR framework for eligible P2M UPI payments.
Yes. The applicable MDR will attract 18% GST on the MDR amount. GST-registered merchants can claim ITC on this GST, subject to applicable rules, while unregistered merchants cannot claim the same credit.
No. MDR is a charge associated with processing eligible payments through the UPI ecosystem. A payment gateway may separately charge a platform, service, or processing fee under its commercial terms, which is not the same as UPI MDR.
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