New Delhi: There is big news for people making payments through UPI. From October 15, 2026, a 0.4% Merchant Discount Rate (MDR) will apply to some merchant UPI transactions above ₹2,000. However, this fee will not be directly charged to customers. According to the government, person-to-person or P2P transactions through UPI will remain completely free.
Under the new system, there will be no MDR on merchant payments up to ₹2,000. For eligible merchant transactions above ₹2,000, a 0.4% MDR will apply. For transactions of ₹75,000 or more, the maximum MDR has been fixed at ₹300 per transaction.
In some essential sectors such as railways, telecom, insurance, fuel and agricultural inputs, a flat MDR of ₹5 has been set instead of 0.4% on payments above ₹2,000. Small merchants who fall under the prescribed zero-MDR category have also been given relief.
The government has clarified that MDR should not be passed on to customers. Banks have been advised to take steps to prevent merchants from recovering this fee from customers. According to the government, around 96% of merchant UPI transactions will not be affected by this change.
What Will Change?
Merchant UPI payments up to ₹2,000: No MDR
Eligible merchant payments above ₹2,000: 0.4% MDR
₹75,000 or more: Maximum ₹300 MDR
P2P UPI transfers: Completely free
In some essential sectors: ₹5 flat MDR
Merchants are not allowed to collect MDR from customers.
Note: This fee is not a UPI charge collected from customers by the government, but an MDR applicable within the merchant payment ecosystem.
