From 15 October, select large-value UPI transactions will attract a fee, but the NPCI assures the system remains cheaper than card payments for most users and merchants.
India’s Unified Payments Interface is set to become slightly more expensive for some merchants from 15 October, when a merchant discount rate will be introduced on select person-to-merchant transactions above ₹2,000. But the National Payments Corporation of India is urging users not to read that as a reason to abandon UPI, saying the system will still be cheaper for businesses than most debit and credit card payments.
According to NPCI’s social media post, transactions up to ₹2,000 will remain free of MDR, a category that it said covers about 96% of UPI activity. For payments above that threshold, the rate will be 0.4%, with a cap of ₹300. Business Standard and Mint reported that this still leaves UPI below the usual cost of card acceptance, where credit card MDRs typically run at 1.5% to 2.5% and debit card charges are generally capped at 0.9%.
For small merchants, the change is designed to be largely irrelevant. The rules cited by TV9 Hindi say UPI QR code payments received by eligible small businesses under the person-to-person-merchant category, up to ₹1 lakh a month, will continue to attract no charge, even when individual payments exceed ₹2,000. That means neighbourhood shops, street sellers and other qualifying merchants should still be able to take UPI payments without the new fee.
The fee structure is more nuanced for sectors where margins are tight or transaction values are high. TV9 Hindi said railway, telecom, insurance, fuel and farm-linked purchases above ₹2,000 will attract a flat ₹5 MDR rather than the percentage-based rate, while capital-market payments, including mutual funds, securities, stockbrokers and dealers, will carry a 0.02% charge capped at ₹300. Reuters-style comparisons published by Business Standard and Mint suggest the overall policy is aimed at preserving UPI’s low-cost appeal while giving merchants a clearer cost framework in selected categories.
Consumers, meanwhile, are not expected to pay the charge directly. TV9 Hindi reported that the MDR will be borne by merchants, with banks advised not to pass it on and UPI app providers barred from imposing hidden platform fees in its name. In practice, that means customers should still be able to use UPI without monthly limits or a separate usage quota, even as the payments ecosystem shifts some of the processing cost to businesses.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
