UPI payments above ₹2,000 will attract MDR under the new framework.
P2P transfers and eligible small merchants will remain outside the MDR framework.
Standard P2M MDR is 0.4%, with category-specific rates and transaction caps.
UPI Payments Above ₹2,000: What Changes From October 15?
From October 15, merchants will pay MDR on select UPI transactions above ₹2,000, while consumers and small merchants remain exempt
Summary
The government has rolled out a new Merchant Discount Rate or MDR, framework for select UPI transactions. From October 15, 2026, merchants will pay a fee on person-to-merchant, or P2M, payments above ₹2,000. Consumers will continue to use UPI free of charge.
The charge sits only on the merchant side. Merchants must settle it with their acquiring banks and cannot pass it on to shoppers. UPI app providers are also barred from levying a platform fee or any other charge on UPI payments.
Standard P2M Rates
The base MDR is 0.4%. That rate applies to UPI payments above ₹2,000 under the standard P2M setup. For transactions of ₹75,000 or more, the charge will be capped at ₹300 per transaction.
The arithmetic is simple. A ₹3,000 payment would leave the merchant with an MDR bill of ₹12. On a ₹50,000 payment, the fee would come to ₹200.
At the upper end, a ₹1 lakh payment would generate ₹400 at 0.4%, but the cap limits the charge to ₹300 because transactions of ₹75,000 and above are subject to that ceiling.
Special Merchant Categories
Some business categories will face a flat charge instead. Railways, telecom services, insurance and fuel, among other specified categories, will attract ₹5 per transaction on UPI payments above ₹2,000 rather than the standard percentage rate.
Fuel is a clear example. Petrol pump operators will pay a flat ₹5 MDR on fuel payments above ₹2,000, while fuel payments below that level will attract no MDR.
Insurance and public utilities are treated the same way. Premium payments above ₹2,000 will draw a ₹5 MDR. Electricity, water and piped natural gas payments above ₹2,000 will also carry the same fee.
UPI payments tied to capital markets will follow another formula. Transactions involving mutual funds, securities, stockbrokers, dealers and investment platforms will attract an MDR of 0.02%, with a ceiling of ₹300.
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Exemptions And Funding
P2P transfers remain exempt. The new MDR structure does not cover person-to-person or P2P, UPI transactions. Money sent between individuals, including transfers to family or friends and transfers between one person’s own bank accounts, will continue to be free.
Small merchants under the Person-to-Person-Merchant or P2PM, category are also spared. The NPCI FAQ defines them as small vendors that receive up to ₹1 lakh a month through UPI QR codes directly into their accounts. A single payment above ₹2,000 does not, by itself, create MDR liability for an exempt P2PM merchant.
The floor still matters. Standard P2M payments below ₹2,000 will stay outside the MDR net and the FAQ says more than 95% of P2M UPI transactions by volume fall in that band.
The government says MDR income will be shared within the UPI ecosystem to help with infrastructure resilience, innovation, cybersecurity and customer service. It has also proposed a dedicated fund to back digital-payment infrastructure and merchant onboarding, especially for smaller merchants in rural areas and Tier 3 to Tier 6 centres.
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UPI Scale And Costs
The case for the change rests on UPI’s scale. According to the NPCI FAQ, UPI handled 2,451 crore transactions worth ₹29.9 lakh crore in August 2026 alone. The document cites that volume as a reason to move toward a more commercially sustainable funding model.
It also puts annual UPI operating costs at about ₹20,000 crore. That estimate includes server bandwidth, fraud prevention systems and bank technical support.
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