UPI MDR Charges: Start date, slabs and why is this Merchant Discount Rate being introduced now? All questions answered

The Centre will soon implement Merchant Discount Rate (MDR) fees on specific UPI transactions. Today we answer what the UPI MDR charge means, the start date, slabs, and why this is being introduced now… 

The Centre will impose Merchant discount rate (MDR) charge on select online transactions conducted under the unified payments interface (UPI) system in India from this month, as per the National Payments Council of India (NPCI).

The NPCI in an announcement has month said that MDR would apply on person-to-merchant (P2M) UPI payments, above a certain threshold, under a revised UPI MDR framework. The rules come into effect from mid-October and keeping UPI free for all customer (person-to-person / P2P) transactions.

What is the start date for UPI MDR charge?

MDR charge will apply on each P2M UPI transaction above ₹2,000, with effect from 15 October 2026, according to the NPCI statement.

The rules keep 95% of low-value UPI transactions below ₹2,000 and small merchant transactions (P2PM) completely free and proposes a new fund to support the expansion of UPI acceptance among small merchants.

What are the slabs for UPI MDR charge?

• Flat MDR of ₹5 per transaction will apply to UPI payments above ₹2,000 in specified merchant categories — essential and thin-margin sectors — such as railways, telecom services, insurance, fuel and agricultural inputs.
• MDR of 0.4% applicable on P2M UPI transactions above ₹2,000.
• For transactions of ₹75,000 and above, the MDR will be capped at ₹300 per transaction.
• Payments relating to mutual funds, securities, stockbrokers and dealers will attract an MDR of 0.02%, capped at ₹300 per transaction.

Who is protected from impact?

The NPCI statement said that there will be no impact on small-value UPI transactions up to ₹2,000 for all merchants, which account for more than 95% of all UPI P2M transactions.