UPI Gets 0.4% MDR Above ₹2,000

India’s UPI ecosystem is entering a new phase. From October 15, 2026, person-to-merchant (P2M) UPI payments above ₹2,000 will attract a 0.4% Merchant Discount Rate (MDR). Importantly, the merchant—not the consumer—will bear the charge. 

Consumers can continue using UPI without a transaction fee. Person-to-person transfers remain free regardless of value, while merchant payments up to ₹2,000 are also outside the MDR framework. More than 95% of merchant transaction volume is expected to remain unaffected. 

For standard merchant payments, MDR is capped at ₹300 for transactions of ₹75,000 and above. A ₹5,000 purchase, for example, would generate an MDR of ₹20, payable by the merchant. 

Certain sectors receive preferential treatment. Railways, telecom, insurance, fuel, agricultural inputs and specified utility payments will attract a flat ₹5 MDR above ₹2,000, while securities-related transactions carry a lower rate. 

Small merchants are protected: eligible vendors receiving up to ₹1 lakh monthly through UPI QR payments remain under zero MDR. Five percent of MDR collections will also support a fund promoting UPI adoption among small merchants. 

The MDR revenue will be distributed across the payments ecosystem, including banks and payment application providers, supporting infrastructure, cybersecurity and continued UPI expansion. Published details indicate the settlement structure is more nuanced than a simple fixed 40%-30%-30% split. 

The change signals UPI’s evolution from a government-supported growth model toward sustainable payment infrastructure economics—while keeping the consumer experience free at the point of payment.