What MDR on UPI payments above Rs 2,000 means for you: FAQs answered
Merchant Discount Rate (MDR) is essentially a fee that a merchant incurs when accepting payments for goods or services through credit or debit cards. It is important to note that person-to-person transactions will continue to be free with no MDR applicable.
A Merchant Discount Rate (MDR) of 0.4% will apply to person-to-merchant UPI transactions above Rs 2,000 starting October 15, 2026, according to a recent notification from the National Payment Corporation of India (NPCI). It's important to note that person-to-person transactions will remain free of any MDR.
A MDR is a fee that merchants pay when accepting credit or debit card payments for goods and services. It's calculated as a percentage of the transaction amount and is deducted by the bank before the remaining payment is credited to the merchant.
The purpose of introducing an MDR for UPI transactions above Rs 2,000 is to ensure the long-term sustainability and resilience of the UPI ecosystem. NPCI has provided a comprehensive set of Frequently Asked Questions (FAQs) to help consumers understand the impact of this new fee structure.
The FAQs explain that MDR will only apply to transactions above Rs 2,000, which make up less than 5% of total UPI transactions. The fee will be capped at Rs 300 for transactions of Rs 75,000 or more. Importantly, there will be no impact on small-value UPI transactions up to Rs 2,000, which make up the vast majority of UPI transactions.
Consumers will continue to use UPI services free of cost. UPI app providers are not allowed to charge platform fees or any other charges for UPI payments. Merchants will not need to pay any additional fees for accepting UPI transactions either.
The MDR framework will take effect on October 15, 2026, giving all stakeholders sufficient time to update their systems. Compared to traditional card-based MDRs, which typically range from 1.5% to 2.5%, UPI's 0.4% fee is significantly lower, making it the most affordable digital payment option for merchants.
The introduction of this MDR is part of India's ongoing efforts to support infrastructure development, innovation, cybersecurity, and customer service within the UPI ecosystem.
Written by urgent.news from Times of India's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
