Merchants to be charged 0.4% for UPI transactions over ₹2,000; small vendors exempt
Ministry of Finance says person-to-person transactions, which will also be exempt, constitute 70% of the value of total UPI transactions; according to the Ministry, only 4% of merchant transactions will attract the charge
The National Payments Corporation of India (NPCI) has announced a 0.4% charge for merchants receiving UPI payments over ₹2,000, according to a circular issued on September 15, 2026. However, this charge will not apply to person-to-person UPI transactions or smaller vendors. UPI transactions to small vendors, defined as those receiving up to ₹1 lakh per month via UPI QR codes, will also be exempt from the charge.
In certain sectors, such as Railways, telecom, insurance, fuel, and agriculture inputs, a flat charge of ₹5 per transaction over ₹2,000 will be applied. This new structure is set to take effect from October 15, 2026. The government has stated that merchant discount rate charges will not be passed on to customers for UPI payments.
Additionally, the 0.4% MDR charge will be shared among payment ecosystem partners, including banks and app providers. For transactions of ₹75,000 and above, the MDR will be capped at ₹300 per transaction. The move aims to make UPI self-sustainable and encourage further expansion in rural and semi-urban areas while maintaining competitiveness and ensuring most payments remain free of charge.
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