India’s Unified Payments Interface will implement its most significant fee update yet in October 2026, applying Merchant Discount Rates to transactions above Rs 2,000, while ensuring person-to-person transfers remain free for users.
India’s Unified Payments Interface is set for its biggest pricing change yet, with merchant transactions above Rs 2,000 due to attract a Merchant Discount Rate from 15 October 2026, according to Zee Business and subsequent reporting. The change does not affect ordinary users sending money to one another: person-to-person UPI transfers will remain free, with no monthly cap or volume limit on those transactions.
Under the revised framework, higher-value person-to-merchant payments above the threshold will carry a 0.4 per cent MDR, while transactions worth Rs 75,000 or more will be capped at Rs 300, Zee Business reported. The charge is intended to sit within the merchant payment system rather than be added to the customer’s bill, and banks have been told not to pass the cost on to consumers.
The structure is not uniform across all sectors. Essential services such as railways, telecoms, insurance, fuel and agriculture inputs will face a flat Rs 5 MDR on qualifying merchant payments above Rs 2,000, rather than the standard percentage-based charge. Capital-market transactions, including payments to mutual funds, securities firms, stockbrokers and dealers, will face a much lower rate of 0.02 per cent, capped at Rs 300 per transaction.
Smaller businesses will remain protected from the new fee if their UPI QR collections are up to Rs 1 lakh a month. The government has said the shift will affect only about 4 per cent of merchant transactions, indicating that most UPI activity will stay outside the charge structure. Earlier reporting by Livemint and The Times of India said the Finance Ministry had also stressed that UPI users themselves would not be charged and that any MDR, where applicable, would remain limited to a narrow slice of higher-value merchant payments.
The government has also barred apps and banks from adding platform fees or hidden charges to UPI payments. According to the reports, 5 per cent of MDR receipts from small merchants will go into a dedicated fund for small businesses, part of an effort to make the system financially sustainable while preserving its rapid expansion in rural and semi-urban India. An article in InvestingPro noted that this new framework comes alongside other merchant-side charges in the broader digital payments ecosystem, including fees on wallet-funded UPI transactions and
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