UPI to introduce merchant fees on transactions above ₹2,000

India's Unified Payments Interface (UPI) will implement a new Merchant Discount Rate (MDR) framework starting October 15. The policy introduces a 0.4% fee on select person-to-merchant (P2M) transactions exceeding ₹2,000. For transactions of ₹75,000 or more, the MDR will be capped at ₹300 per transaction.

To protect essential services with high volumes and narrow margins, a flat fee of ₹5 will apply instead of the 0.4% rate for specific sectors, including railways, telecom, fuel, and insurance. The government and the National Payments Corporation of India (NPCI) have clarified that these charges are to be borne by merchants and not passed on to consumers.

RBI Governor Sanjay Malhotra stated that the new fee is unlikely to adversely impact the momentum or volume of digital payments. Person-to-person (P2P) transfers will remain free regardless of the amount, and merchant payments up to ₹2,000 will also remain exempt. Approximately 96% of all P2M transactions are expected to remain unaffected by this change.