The Reserve Bank of India has backed a new merchant discount rate (MDR) on person-to-merchant UPI payments above Rs 2,000, with the 0.4% charge scheduled to take effect from October 15, 2026. Customers will continue to make UPI payments without paying a direct fee, while merchants will bear the charge within the payment ecosystem.
The National Payments Corporation of India has notified the new MDR structure for large-value person-to-merchant transactions. Person-to-person UPI transfers will remain free, and merchants will not pay MDR on person-to-merchant payments of up to Rs 2,000.
The RBI said the change would help UPI continue to scale, innovate and serve consumers and businesses across the country. It also said a fair distribution of MDR among participants in the payments ecosystem would support continued investment in technology, infrastructure and payment acceptance networks.
The Finance Ministry clarified that the charge would not be directly imposed on customers. “Customers will not be required to pay any charge when making such payments through UPI,” it said in a statement quoting the NPCI circular. The ministry added that MDR is a charge within the merchant payment ecosystem, rather than a fee on customers using UPI.
Under the notified structure, merchants will pay 0.4% of the value of eligible person-to-merchant transactions above Rs 2,000. For transactions of Rs 75,000 and above, the MDR will be capped at Rs 300 per transaction. MDR is generally deducted from the transaction amount before the balance is transferred to the merchant.
The change leaves everyday low-value digital payments outside the new charge. Transactions of up to Rs 2,000 account for more than 95% of person-to-merchant UPI payments by volume, according to the report. The government has said the arrangement is intended to keep routine digital payments free while creating a revenue model for the wider UPI ecosystem.
The October 15 implementation date gives acquiring banks, payment aggregators, fintech companies and corporate accounting platforms time to update their software and billing systems. These institutions will need to reflect the revised charge in transaction processing, reconciliation and merchant settlement systems.
The RBI said the new arrangement could support wider UPI acceptance, deepen the customer base and sustain growth in transaction volumes. It said the central bank remained committed to keeping UPI safe, seamless, affordable and accessible while supporting the long-term sustainability of the digital payments ecosystem.
UPI is operated by NPCI, an initiative of the RBI and the Indian Banks’ Association. The platform enables real-time transfers between individuals and payments directly to merchants. It is currently accepted in 11 countries, with Uzbekistan the latest addition, alongside Singapore, the UAE, France, Mauritius, Nepal, Bhutan, Qatar, Sri Lanka, Cambodia and Greece.
The revised MDR will therefore apply to merchants and payment-system participants from October 15, while customers will continue to make UPI payments without a direct transaction charge.
