India to implement new UPI MDR framework for merchant transactions

UPI Merchant Discount Rate digital payments NPCI financial regulation

The Indian government and the National Payments Corporation of India (NPCI) have announced a new Merchant Discount Rate (MDR) framework for Unified Payments Interface (UPI) transactions, set to take effect on October 15, 2026. Under this new policy, select person-to-merchant (P2M) transactions exceeding ₹2,000 will incur a 0.4% MDR fee. For transactions of ₹75,000 or more, the fee will be capped at ₹300 per transaction.

To protect small businesses and consumers, the framework includes several exemptions. Peer-to-peer (P2P) transfers will remain entirely free regardless of the amount. Additionally, P2M transactions up to ₹2,000 will continue to be free of charge. Small merchants who receive up to ₹1 lakh per month via UPI QR codes are also exempt from these fees. Certain essential sectors, including railways, telecom, insurance, and fuel, will follow a different structure with a flat ₹5 fee for transactions over ₹2,000.

The Reserve Bank of India (RBI) has supported the move, stating it is an important step toward the long-term sustainability of the digital payments ecosystem. The government has emphasized that the MDR is not a tax and is intended to be distributed among banks and payment service providers to support infrastructure and security.

The announcement has sparked political debate, with opposition leaders alleging the move favors American payment companies and could lead to increased costs for consumers if merchants pass the fees on. However, Union Minister Jyotiraditya Scindia stated that any attempt by merchants to pass these costs to customers would be a criminal offense.

Entities

Anil Kumar Lahoti · Cellular Operators Association of India · Government of India · India · Ministry of Finance · Narendra Modi · National Payments Corporation of India · Nirmala Sitharaman · Paytm · Rahul Gandhi · Reserve Bank of India · RuPay

Claims

What the coverage asserts, and how many sources carry each claim.

[● 17 SOURCES] Banks and payment system providers are prohibited from imposing direct or indirect charges on UPI transactions up to Rs 2,000. himachalabhiabhi.com · publictv.in · www.thefinancialworld.com · thesentimes.com · www.varthabharati.in · +3 more
[● 4 SOURCES] Opposition leader Rahul Gandhi criticized the move, suggesting that merchant fees would eventually be passed on to consumers.
[● 20 SOURCES] The zero-charge mandate also applies to payments made using RuPay-powered debit cards. himachalabhiabhi.com · publictv.in · www.thefinancialworld.com · thesentimes.com · www.varthabharati.in · +4 more
[● 4 SOURCES] The government stated that charges are necessary to fund infrastructure, cybersecurity, and fraud prevention due to rising transaction volumes. himachalabhiabhi.com · thesentimes.com
[● 9 SOURCES] Person-to-person (P2P) UPI transfers will remain free of charge. himachalabhiabhi.com · www.thefinancialworld.com · www.varthabharati.in · publictv.in · www.aajsamaaj.com
[● 3 SOURCES] Approximately 96 percent of UPI transactions by volume fall within the protected zero-charge threshold of up to Rs 2,000.
[● 18 SOURCES] The government issued the notification under Section 10A of the Payment and Settlement Systems Act, 2007. publictv.in · www.thefinancialworld.com · thesentimes.com · www.varthabharati.in · www.livelaw.in · +3 more
[● 15 SOURCES] Any future Merchant Discount Rate (MDR) would only apply to a limited set of high-value merchant transactions. himachalabhiabhi.com · publictv.in · www.thefinancialworld.com · thesentimes.com · www.varthabharati.in · +4 more
[● 4 SOURCES] Transactions over 2,000 rupees represent about 5% of total transaction volume but roughly 65% of total UPI transaction value. publictv.in
[○ 1 SOURCE] Congress President Mallikarjun Kharge has criticized the central government over potential UPI charges.
[● 24 SOURCES] The central government maintains that no direct charges will be levied on customers for UPI payments. himachalabhiabhi.com · publictv.in · www.thefinancialworld.com · www.aajsamaaj.com · businessnewsthisweek.com · +10 more
[● 4 SOURCES] Rahul Gandhi alleges that commercial UPI transactions exceeding 2,000 rupees may incur charges.