UPI Charge Update: What changes from 15 October 2026?
The new Merchant Discount Rate (MDR) framework introduces charges for specified merchant-side UPI transactions while keeping everyday person-to-person payments and most small-value transactions free.
Key points:
🔹 P2P transactions: Remain completely free, irrespective of transaction value.
🔹 Merchant payments up to ₹2,000: Zero MDR.
🔹 Small merchants (P2PM): Merchants receiving up to ₹1 lakh/month through UPI QR continue under the zero-MDR framework.
🔹 Specified P2M transactions above ₹2,000: 0.4% MDR, capped at ₹300 per transaction for transactions of ₹75,000 and above.
🔹 Essential & thin-margin sectors: Transactions above ₹2,000 in specified categories such as railways, telecom, insurance, fuel and agricultural inputs attract a flat ₹5 MDR.
🔹 Capital-market transactions: 0.02% MDR, capped at ₹300, for specified transactions involving mutual funds, securities, stockbrokers and dealers.
🔹 UPI AutoPay / mandates: Prescribed MDR does not apply to recurring transactions such as specified utility bills, subscriptions and recurring investments.
🔹 Consumers: MDR is not a customer charge. Banks have been advised to ensure merchants do not pass MDR on to customers.
🔹 UPI apps: Platform fees or hidden charges for UPI payments are prohibited under the framework.
🔹 Daily limits: Existing bank/NPCI transaction limits are security and risk-management measures—not charging thresholds. Individuals continue to have free UPI usage without monthly quotas.
🔹 Overall impact: The Government estimates that only around 4% of merchant transactions will attract MDR, leaving approximately 96% unaffected.
🔹 Small-merchant support: 5% of total MDR collections will be contributed to a dedicated fund for promoting UPI adoption among small merchants.
MDR is not a tax or government levy; it is a charge within the merchant-payment ecosystem and is distributed among participating payment-system entities.
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