UPI Payments Above ₹2,000 to Attract 0.4% Merchant Fee From October 15

India’s UPI payment system is set for a major change from October 15, 2026, with a new Merchant Discount Rate (MDR) being introduced on select high-value payments made to merchants.

Under the new framework announced by the National Payments Corporation of India (NPCI), a 0.4% MDR will apply to eligible person-to-merchant (P2M) UPI transactions above ₹2,000. However, the charge will be paid by the merchant and consumers will continue to make UPI payments without a transaction fee.

What Changes From October 15?

The new MDR framework applies specifically to eligible P2M transactions, meaning payments made by customers to businesses or merchants.

For example:

• ₹2,000 or below: No MDR
• ₹3,000: 0.4% MDR = ₹12
• ₹10,000: 0.4% MDR = ₹40
• ₹50,000: 0.4% MDR = ₹200
• ₹75,000 and above: Maximum MDR of ₹300

The ₹300 cap means that even when 0.4% of a transaction would exceed ₹300, the merchant will not pay more than the prescribed maximum.

Consumers Will Still Pay Nothing

For ordinary UPI users, the important point is that there will be no transaction fee for making UPI payments.

Person-to-person transfers, such as sending money to family or friends, will remain free. Payments to merchants up to ₹2,000 will also remain free under the new framework.

UPI app providers will also not be permitted to impose a separate platform fee on consumers for these payments.

Merchants Will Bear the MDR

The new charge is designed to be collected from merchants through their acquiring banks rather than directly from customers.

The MDR revenue will be shared among participants in the UPI payment ecosystem, including banks, payment service providers and app providers. The framework is intended to create a more sustainable revenue model for UPI as transaction volumes continue to grow.

Importantly, merchants cannot directly pass the MDR on to customers as a UPI transaction charge under the announced framework.

Why Is UPI Introducing MDR Now?

UPI has grown into one of the world’s largest real-time digital payment systems, processing billions of transactions every month.

The government and NPCI have argued that the payment ecosystem needs sustainable funding for areas including cybersecurity, fraud prevention, infrastructure upgrades, innovation and customer support.

The change therefore marks a shift from the largely zero-MDR model that has supported UPI’s rapid expansion for several years.

For consumers, everyday UPI payments are expected to remain largely unaffected. The bigger impact will be on merchants handling larger digital transactions.

What This Means for UPI Users

For most people, there is no reason to stop using UPI.

Sending money to another person will remain free, while small everyday merchant payments will continue without MDR. The new charge primarily affects eligible merchant transactions above ₹2,000.

The change is therefore less about charging UPI users and more about introducing a revenue mechanism within the payment ecosystem.

With UPI now deeply embedded in India’s digital economy, the new MDR framework represents an important new phase for the country’s most widely used digital payment platform.