Govt announces UPI charges, merchants to pay 0.4% above Rs 2,000, remain free for consumers

The government has announced a new Merchant Discount Rate (MDR) framework for select UPI transactions, under which merchants will pay a fee on person-to-merchant (P2M) payments above Rs 2,000, while consumers will continue to use UPI free of charge.

The new framework will take effect from October 15, 2026. Under the standard P2M structure, a 0.4% MDR will apply to UPI transactions above Rs 2,000. For transactions of Rs 75,000 and above, the MDR will be capped at Rs 300 per transaction.

The charge will be paid by merchants to



their acquiring banks and cannot be passed on to customers. Consumers will continue to pay no transaction fee for making UPI payments. UPI app providers will also not be allowed to levy a platform fee or any other charge on UPI payments.

For example, on a Rs 3,000 UPI payment, the merchant would pay Rs 12 as MDR at the 0.4% rate. On a Rs 50,000 payment, the MDR would be Rs 200. On a Rs 1 lakh transaction, the 0.4% calculation would come to Rs 400, but the merchant would pay Rs 300 because of the cap applicable to transactions of Rs 75,000 and above.