UPI Charges from 15 October 2026: Who Pays the 0.4% MDR on Payments Above ₹2,000?

The proposed Merchant Discount Rate (MDR) framework for certain high-value Unified Payments Interface (UPI) transactions has raised questions among consumers and businesses across India.

Under the announced framework, a 0.4% MDR would apply to eligible person-to-merchant (P2M) UPI transactions exceeding ₹2,000, subject to specified exemptions and a maximum charge of ₹300 per transaction. The fee is intended to be borne by merchants rather than customers.

However, the planned implementation date of 15 October 2026 is reportedly under reconsideration, with reports indicating a possible postponement to January 2027. The final implementation date should be verified against an official announcement before businesses make changes to their payment systems.

What Does the Proposed UPI MDR Framework Mean?

The announced framework includes the following provisions:

• Person-to-person (P2P) transfers: These are not covered by the proposed merchant MDR.
• Merchant payments up to ₹2,000: These remain exempt under the announced framework.
• Eligible merchant payments above ₹2,000: A 0.4% MDR would apply, subject to the prescribed cap and exemptions.
• Transactions of ₹75,000 or more: The MDR would be capped at ₹300 per transaction under the announced structure.
• Eligible small merchants: Merchants qualifying under the specified P2PM category would receive zero-MDR treatment.
• Specified sectors: Certain transactions, including those in railways, telecom, insurance and fuel, have been assigned special rates under the announced framework.

Who Pays the Merchant Discount Rate?

MDR is a payment-processing charge associated with eligible merchant transactions. Under the announced framework, the merchant bears this cost rather than the customer.

For example, a ₹50,000 eligible merchant payment would attract a calculated MDR of ₹200 before considering any applicable tax or other prescribed adjustments. A ₹1,00,000 eligible payment would reach the announced ₹300 cap.

Consumers should not assume that every UPI payment will attract a fee. The framework concerns specified merchant transactions and does not impose a ₹2,000 limit on how much a person can transfer.

What Should Businesses Do?

Merchants should take the following steps:

1. Confirm the implementation date and applicable rates with their acquiring bank or payment service provider.
2. Review their merchant category and eligibility for any exemptions.
3. Check how payment-processing charges will appear in settlement statements.
4. Avoid passing on charges to customers contrary to applicable rules.

Conclusion

The proposed UPI MDR framework could affect payment-processing costs for businesses accepting certain high-value UPI payments. However, the announced implementation date is reportedly under review.

Businesses should monitor official updates from NPCI, the Ministry of Finance and their acquiring banks before changing their pricing or payment procedures.

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