NPCI Introduces 0.4% MDR on UPI Payments Above ₹2,000 From October 15, 2026

The National Payments Corporation of India (NPCI) has set a 0.4% Merchant Discount Rate (MDR) on select Person-to-Merchant (P2M) UPI transactions above ₹2,000, as per news reports. The revised charges will come into effect on October 15, 2026. 

MDR is a fee paid by merchants to the banks and other entities involved in processing a digital payment. The new charge will apply to merchants and cannot be recovered separately from customers. 

Transactions Up to ₹2,000 Remain Free 

There will be no MDR on UPI payments of up to ₹2,000. NPCI said these transactions account for more than 95% of UPI's P2M transaction volume. 

Person-to-Person (P2P) payments will continue to be free, irrespective of the amount transferred. Customers will also not be charged a separate platform or transaction fee for making UPI payments. 

Small merchants under the P2PM category will remain outside the MDR structure. NPCI has defined them as merchants receiving up to ₹1 lakh a month through UPI QR codes. 

MDR on Higher-Value Payments 

At 0.4%, a ₹3,000 payment will attract an MDR of ₹12, while a ₹50,000 transaction will result in a charge of ₹200. 

The MDR will be capped at ₹300 for payments of ₹75,000 and above. A ₹1 lakh payment, therefore, will attract ₹300 instead of ₹400 under the 0.4% rate. 

Lower Rates for Selected Sectors 

Railways, telecom, insurance and fuel payments above ₹2,000 will have a flat MDR of ₹5 per transaction. 

Capital-market payments will carry an MDR of 0.02%, subject to a maximum of ₹300. The category covers payments to mutual funds, stockbrokers, and securities dealers. 

Cost of Running UPI 

NPCI said UPI involves costs related to servers, bandwidth, fraud prevention, cybersecurity, and technical support. Industry estimates cited by NPCI put these costs at around ₹20,000 crore a year. 

UPI processed 2,451 crore transactions worth ₹29.9 lakh crore in August 2026. NPCI said MDR collections will go towards payment infrastructure, cybersecurity, innovation, and customer service. 

Fund Proposed for Small Merchants 

NPCI has also proposed a dedicated fund for digital-payment infrastructure in Tier 3-6 centres, including the northeastern states, Jammu & Kashmir, and Ladakh. 

The detailed framework is expected to be finalised in consultation with the Reserve Bank of India within three months. 

Read More: UPI Merchant Charges: Who Pays and Who Does Not from October 15, 2026! 

Conclusion  

UPI payments above ₹2,000 will attract MDR for eligible merchants, while consumers, P2P transfers and small merchants remain outside the charge. 

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