UPI New Rules: MDR Charge on Transactions Above ₹2,000 from October 2026

What the new MDR rule entails

Starting 15 October 2026, UPI payments exceeding ₹2,000 will attract a merchant discount rate (MDR) of 0.4 % payable by the merchant, as reported by government sources [1]. The National Payments Corporation of India (NPCI) has implemented this charge, with the fee going to banks and payment processors [2].

Rate, cap and who pays

• Rate: 0.4 % of the transaction amount.
• Cap: Maximum ₹300 per transaction for amounts of ₹75,000 or more.
• Who pays: The merchant, not the customer.

Exemptions and reliefs

• Person‑to‑person UPI transfers remain completely free of MDR.
• Small merchants receiving up to ₹1 lakh per month via UPI QR codes are excluded from the MDR.
• Certain essential services may have a different rate, as noted in the government’s notification.

Why the MDR is being introduced

The Parliamentary Standing Committee on Finance highlighted that the zero‑MDR model made UPI financially unsustainable. It noted that for FY 2026‑27 the budgetary allocation was about ₹2,000 crore while the estimated operational cost of the UPI ecosystem was around ₹20,700 crore [1]. The committee recommended a tiered MDR structure to create a self‑sustaining revenue model and reduce dependence on government subsidies.

The committee also stressed that incentives for low‑value transactions are needed to promote digital adoption in small towns and rural areas, and that the new MDR should be notified without delay [1].

Reactions from traders and customers

Traders told BBC Hindi that they may raise prices to cover the MDR cost, while customers expressed worry about higher expenses for everyday purchases [2]. The concern is that the fee, although levied on merchants, could be passed on to consumers.

Political responses

The Durg‑Bhilai district Congress committee labelled the MDR implementation “anti‑people” and opposed its rollout [3]. In contrast, BJP cited the Finance Standing Committee’s report, saying Congress MPs present at the meeting did not object to the proposed MDR framework [1].

What users should know

Current UPI transactions remain free of merchant fees because the MDR will only apply from 15 October 2026. Only merchant‑initiated UPI payments above ₹2,000 are affected; peer‑to‑peer transfers are unchanged. Users can verify the official notification from NPCI or the Ministry of Finance for the exact rate, cap and exemption details.