UPI MDR Charges: When do the provisions take effect? How does it compare with international payment systems?

From 15 October 2026, a 0.4% MDR will apply to specified UPI merchant transactions above ₹2,000, capped at ₹300 for transactions of ₹75,000 and above. Consumers and P2P payments remain free, while India’s model differs from digital-payment fee structures in other countries.

India’s Unified Payments Interface (UPI) will move away from its zero-MDR model for a limited set of merchant transactions from 15 October 2026. A 0.4% Merchant Discount Rate (MDR) will apply to specified person-to-merchant (P2M) UPI payments above ₹2,000, while consumers will continue to make UPI payments without paying MDR.

The government says the framework is intended to support the long-term sustainability of the UPI ecosystem, including investment in infrastructure, innovation, cybersecurity and customer service. MDR is a merchant-side payment ecosystem charge and will be shared among participants such as banks, payment service providers and UPI application providers. It is not a tax collected by the government or NPCI.

Who will pay UPI MDR and who remains exempt

The standard MDR will be 0.4% on specified P2M transactions above ₹2,000. For transactions of ₹75,000 and above, the charge will be capped at ₹300. This means an eligible ₹1 lakh merchant payment will attract ₹300 in MDR instead of ₹400.

The change does not mean consumers will start paying a UPI fee. Person-to-person transactions will remain free regardless of the amount, while merchant payments up to ₹2,000 will continue to have zero MDR. Eligible small merchants will also remain covered by the zero-MDR framework. The government expects about 96% of P2M transactions to remain unaffected.