UPI MDR is back for large payments, but in a very limited way. NPCI has introduced a 0.4% Merchant Discount Rate on select person to merchant UPI transactions above Rs 2,000. The new framework takes effect from October 15, 2026.
What changes from October 15
For transactions of Rs 75,000 and above, the MDR will be capped at Rs 300 per transaction. A merchant will not pay more than that, even when 0.4% of the value crosses the cap. Take a Rs 1 lakh payment. At 0.4%, it would attract Rs 400, but the fee payable will be limited to Rs 300.
For select merchant categories such as railways, telecom services, insurance and fuel, a flat MDR of Rs 5 per transaction will apply on payments above Rs 2,000, instead of the 0.4% rate.
Read More: NPCI FY26 Revenue Rises 22% To Rs 4,240 Crore, Surplus Falls 32%
Small transactions stay free
UPI payments of up to Rs 2,000 will continue to carry zero MDR. That is not a small carve out. According to NPCI’s FAQ, small value transactions account for more than 95% of the total volume of person to merchant UPI payments. Small vendors under the person to person merchant framework also stay exempt, which covers merchants receiving up to Rs 1 lakh a month through UPI QR codes directly into their accounts.
Read More: Moneyview Halves IPO Fresh Issue To Rs 750 Crore Ahead Of Listing
Who pays, and who does not
The charges apply to merchants, not consumers. Users will keep making UPI payments free of cost. UPI app providers will not be allowed to levy a platform fee or any other charge on UPI payments. That line matters, because the fear after any MDR announcement is that the cost quietly travels to the customer.
Why it matters
UPI has run on zero MDR for years, and the economics have been carried by banks, the government and the apps themselves. Everyone in the chain has been waiting to see how the system pays for itself at scale. The new framework tests a narrow middle path. Large merchants pay a small fee, small ones pay nothing, and customers stay untouched. If the volumes hold and the exemptions keep the small seller out of it, this could become the template for how India’s payments rails are funded in the next decade.