News
New UPI Merchant Discount Rate Rules Announced by the Government
Learn about the new 0.4% MDR on UPI P2M transactions above ₹2,000 taking effect on 15th October 2026, and how it impacts consumers and merchants.
- Reviewed by
- Shravya Mishra
- Published
This brief was drafted with the help of an AI system from the official source listed below, then checked against that source and approved by Shravya Mishra before publication. How we work.
What happened
The Government of India announced a new Merchant Discount Rate (MDR) policy for select Unified Payments Interface (UPI) Person-to-Merchant (P2M) transactions. Starting 15th October 2026, an MDR of 0.4% will apply to P2M UPI transactions above ₹2,000. For transactions of ₹75,000 and above, this fee is capped at ₹300 per transaction. Small vendors operating under the Person-to-Person-Merchant (P2PM) framework who receive up to ₹1 lakh per month through UPI QR codes directly into their accounts will continue to enjoy zero MDR. Small-value UPI transactions up to ₹2,000, which make up over 95% of total volume, remain unaffected.
What it means for you
If you are an ordinary household consumer, you will continue to use UPI completely free of charge. There are no fees, monthly quotas, or platform fees for making regular payments, scanning QR codes at local shops, sending money to friends and family (P2P), or setting up automated recurring payments like utility bills and subscriptions. Retail prices at stores will not rise because merchants typically absorb nominal digital processing costs as standard operational overheads. Furthermore, small vendors with P2PM accounts will not be charged MDR even if they receive payments above ₹2,000, and they do not need to replace their existing QR codes or soundboxes.
What to do
There is nothing complicated for ordinary users to do. Continue using your UPI apps and scanning QR codes as usual without worrying about extra transaction fees. If you hear rumors about new consumer charges, ignore them and check verified notifications inside your banking applications or official updates from the Reserve Bank of India (RBI), the Ministry of Finance, or the National Payments Corporation of India (NPCI).
Common questions
Will ordinary consumers be charged for making payments via UPI?
No. UPI services will continue without any cost to consumers for daily expenses, and Person-to-Person transfers remain entirely free.
When do the updated MDR provisions take effect?
The finalized MDR framework and threshold structure take effect from 15th October 2026.
Do small merchants need to change their existing QR codes?
No. Existing QR infrastructure will continue to function normally, and merchants do not need to replace, re-register, or alter their existing physical QR stands or soundboxes.
Sources
- Government of India: Merchant Discount Rate (MDR) on Select UPI (P2M) Transactions
This is general information for education, not investment, tax or legal advice. Rules and rates change; check the official source before acting. Read the full disclaimer.
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