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

Starting October 15, 2026, the National Payments Corporation of India (NPCI) will implement a Merchant Discount Rate (MDR) of 0.4% on certain person-to-merchant (P2M) UPI transactions exceeding ₹2,000. 

This marks the end of the zero-fee era for some merchants, driven by the need to support infrastructure, cybersecurity, and ecosystem viability. 

Who Will Pay the UPI Merchant Charges? 

Large and medium merchants processing P2M UPI transactions above ₹2,000 will incur a 0.4% fee, capped at ₹300 per transaction for amounts above ₹75,000.  

Specific sectors such as railways and fuel payments will face a flat fee of ₹5 for transactions over ₹2,000.  

Educational institutions and entrance examination boards will adhere to flat or capped structures for payments exceeding ₹2,000. 

Who Will Not Pay the UPI Merchant Charges? 

Individual consumers making person-to-person (P2P) transactions or standard purchases will not pay any transaction fees. Banks are prohibited from passing the MDR fee onto customers.  

Micro merchants and small vendors receiving up to ₹1,00,000 per month via UPI QR codes under the P2PM framework, as well as rural and semi-urban QR code transactions, will maintain a zero-MDR status.  

Transactions under ₹2,000, including small-value P2M and educational UPI payments, remain free. 

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Standard Commercial MDR Tiers 

The new policy establishes a nominal variable MDR rate of 0.4% for standard Person-to-Merchant (P2M) transactions exceeding ₹2,000.  

Transactions of ₹75,000 or more will have a maximum fee cap of ₹300. Transactions below ₹2,000 remain free of charges. 

Micro Merchant and Consumer Tiers 

Small-value merchant transactions up to ₹2,000 account for over 95% of UPI volumes. The guidelines ensure zero transaction fees for ordinary retail consumers.  

Micro-merchants under the Person-to-Person-Merchant (P2PM) framework, receiving up to ₹1 lakh per month, are fully exempt from these updates. 

Specialized Industry Flat Rates 

High-volume sectors benefit from a fixed concessional rate instead of the standard percentage. A flat fee of ₹5 applies to transactions over ₹2,000 for sectors like railways, telecom, utilities, insurance, and fuel.  

Transactions below ₹2,000 in these sectors carry zero MDR. 

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Capital Market Fee Framework 

The policy specifies a reduced variable fee of 0.02% for capital market fund transfers, with a maximum cap of ₹300 per transaction. This aims to promote retail participation in regulated investment segments. 

Reasons Behind the End of the Zero-Fee Era 

The NPCI cites the need for sustained investments in infrastructure and scaling to handle a higher share of retail payments. Funds from the MDR will support upgrades in fraud prevention, cybersecurity resilience, and customer service infrastructure.  

Additionally, a shared revenue stream is necessary for payment app providers, acquiring banks, and payment service providers to maintain and grow the processing framework sustainably. 

Conclusion 

From October 15, 2026, a 0.4% MDR applies to P2M UPI transactions over ₹2,000, affecting large and medium merchants. Micro merchants, small vendors, and transactions under ₹2,000 remain exempt. The MDR supports infrastructure, cybersecurity, and ecosystem growth. 

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