- NPCI announced 0.4% MDR on UPI above Rs 2,000.
- Merchants will pay this MDR; customers remain exempt from fees.
- These charges aim to fund UPI infrastructure and ecosystem sustainability.
The National Payments Corporation of India (NPCI) announced on Tuesday that a 0.4% Merchant Discount Rate (MDR) will be charged on certain Unified Payments Interface (UPI) transactions above Rs 2,000.
The revised framework will apply to Person-to-Merchant (P2M) UPI payments, with the MDR capped at Rs 300 per transaction. Customers, however, will not have to pay any fee for making UPI payments under the new system.
The 0.4% MDR will be applicable to merchants on eligible transactions exceeding Rs 2,000.
What Is MDR?
Merchant Discount Rate (MDR) is a fee charged on certain digital payment transactions and distributed among players in the payment ecosystem to support infrastructure, technology and related services. Under the proposed framework, a 0.4% MDR will apply to Person-to-Merchant (P2M) UPI transactions above Rs 2,000, with the charge capped at Rs 300 for transactions of Rs 75,000 and above.
Why Is UPI MDR Being Introduced Now?
UPI processes billions of transactions every month, requiring continuous investment in infrastructure resilience, innovation, cybersecurity and customer service. The proposed MDR is intended to provide a sustainable source of funding for the wider UPI ecosystem.
The charges will apply only above the Rs 2,000 threshold, keeping UPI an affordable option for merchants while supporting the long-term sustainability of the payment network.
How Does UPI MDR Compare With Credit And Debit Cards?
The proposed UPI MDR is significantly lower than traditional card-based transaction fees. Standard credit card MDRs typically range between 1.5% and 2.5% per transaction, while debit card MDRs can be capped at up to 0.90%.
With a baseline MDR of 0.4% above Rs 2,000 and a Rs 300 cap for transactions of Rs 75,000 and above, UPI would remain a relatively low-cost digital payment acceptance option for merchants.
When Will The New MDR Rules Take Effect?
The finalised MDR framework and threshold structure will take effect from October 15, 2026.
The timeline is intended to give acquiring banks, payment aggregators, fintech applications and corporate accounting platforms enough time to update their software engines and billing systems.
How Does UPI MDR Compare With Global Payment Systems?
Most international payment systems, including digital public infrastructures, operate with economic models designed to support infrastructure and innovation.
India’s approach continues to prioritise accessibility, scale and financial inclusion while seeking a sustainable funding model for UPI.
Who Will Decide How MDR Is Implemented?
The operational parameters, fee distribution models and category-wise caps will be decided by the UPI and Services Steering Committee, headed by the National Payments Corporation of India (NPCI).
