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UPI merchant transactions above Rs 2,000 to attract 0.4% MDR
Sep-16-2026

The government has set a nominal Merchant Discount Rate (MDR) of 0.4% on Person-to-Merchant (P2M) UPI transactions above Rs 2,000. The MDR will be shared among participants in the payment ecosystem, including banks, payment service providers and UPI application providers. For transactions of Rs 75,000 and above, the MDR will be capped at Rs 300 per transaction. All P2M transactions of up to Rs 2,000 will remain free of MDR, and customers will not be required to pay any charge when making such payments through UPI. The new MDR framework and threshold structure will take effect from October 15, 2026.

Transactions above Rs 2,000 in essential and thin-margin sectors, including railways, telecommunications, insurance, fuel and agricultural inputs, will attract a flat MDR of Rs 5 per transaction. The flat charge is intended to provide cost certainty for critical public services and businesses operating on narrow margins. Payments relating to mutual funds, securities, stockbrokers and dealers will attract an MDR of 0.02%, capped at Rs 300 per transaction. The lower rate is intended to support continued retail participation in formal financial markets.

Small merchants, including street vendors, receiving up to Rs 1 lakh per month through UPI QR codes under the Person-to-Person-Merchant (P2PM) category will continue to enjoy zero MDR on all transactions. The provision is intended to protect street vendors, neighbourhood shops and other small businesses from additional payment costs.

Meanwhile, all Person-to-Person (P2P) UPI transactions will remain completely free, irrespective of the amount transferred. No transaction fee, platform fee or other charge may be imposed on individuals for sending or receiving money through UPI. According to the government, P2P transactions account for 70% of UPI's total transaction value and will therefore remain completely outside the MDR framework. Overall, around 96% of P2M transactions will remain unaffected by the new MDR framework.

MDR is neither a tax nor a charge collected by the Government or National Payments Corporation of India (NPCI). It is distributed among payment ecosystem participants, including banks and payment application providers, to support the operation and continued expansion of the UPI ecosystem.

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