Centre fixes 0.4% fee on UPI transactions above Rs 2,000 from October 15

Centre fixes 0.4% fee on UPI transactions above Rs 2,000 from October 15

Mangalore Today News Network

New Delhi, Sep 16, 2026: The government has introduced a new Merchant Discount Rate (MDR) of 0.4% on eligible UPI person-to-merchant (P2M) transactions above Rs 2,000, effective October 15, 2026.

The charge will be capped at Rs 300 per transaction, meaning payments of Rs 75,000 and above will attract a maximum MDR of Rs 300.

The new MDR will apply within the merchant payment ecosystem and will not be charged to consumers. Person-to-person (P2P) UPI transfers will continue to remain free, irrespective of the amount transferred. UPI payments up to Rs 2,000 will also remain outside the new MDR framework.

The Finance Ministry said banks have been advised to ensure that merchants do not pass the MDR cost on to customers. UPI application providers have also been barred from imposing platform fees or hidden charges on users.

The MDR collected will be shared among participants in the payment ecosystem, including banks and UPI application providers. The government said the revised framework is intended to support investment in UPI infrastructure, cybersecurity, innovation and other areas needed to sustain the digital payments ecosystem.

Special rates have been prescribed for certain sectors. Payments above Rs 2,000 in essential and thin-margin sectors such as railways, telecommunications, insurance, fuel and agricultural inputs will attract a flat MDR of Rs 5 per transaction. Certain utility and education payments are also covered under special provisions.

Transactions involving mutual funds, securities, stockbrokers and dealers will attract a lower MDR of 0.02%, capped at Rs 300 per transaction.

Small merchants receiving up to Rs 1 lakh per month through UPI QR codes under the P2PM category will continue to enjoy zero MDR, protecting street vendors, neighbourhood shops and other small businesses from additional payment costs.

The move ends the nearly six-year period of zero MDR for eligible UPI merchant payments. The government and payments industry have said the revised mechanism is aimed at creating a sustainable revenue model for the UPI ecosystem.

The decision has also drawn political criticism, with Congress leader Rahul Gandhi questioning the move and alleging that the government had come under pressure from US companies. The BJP has rejected the criticism and said consumers will not be charged for UPI payments.

Payments industry representatives have welcomed the introduction of MDR, arguing that it could provide a direct revenue stream for maintaining and strengthening UPI infrastructure. At the same time, trader bodies have expressed concerns about the impact of the charges on merchant margins.

The new MDR framework will come into effect from October 15, 2026.