Our Bureau
New Delhi
India’s Unified Payments Interface (UPI) will introduce a 0.4% Merchant Discount Rate (MDR) on merchant transactions above ₹2,000 from October 15, 2026, ending more than six years of zero-cost payments for large merchant transactions. The fee will be paid by merchants, while person-to-person transfers and merchant payments up to ₹2,000 will remain free.
The National Payments Corporation of India (NPCI), which operates UPI, said the new framework is intended to support investment in payment infrastructure, cybersecurity, innovation and customer service. The revenue will be distributed among banks, payment apps and other service providers involved in processing transactions.
The standard MDR will be capped at ₹300 for transactions above ₹75,000. Certain categories, including railways, telecom, insurance and fuel, will attract a flat fee of ₹5. Small merchants receiving up to ₹1 lakh a month through QR-code payments directly into their accounts will also remain exempt.
The government and NPCI have said the charges cannot be passed on to consumers. However, retailer bodies have raised concerns that the additional cost could put pressure on profit margins and encourage some businesses to prefer cash, particularly ahead of the festive season.
The decision comes as UPI continues to handle record volumes. In August, the platform processed approximately 24.5 billion transactions worth ₹29,823 billion, according to official data. The revised model is intended to make the payment ecosystem financially sustainable without relying entirely on government subsidies.
The move has sparked debate over the balance between maintaining affordable digital payments and funding the infrastructure required to support their continued growth.