NEW DELHI, September 15, 2026 (91bps) – India will levy a merchant discount rate of 0.4% on UPI person-to-merchant transactions above ₹2,000, while keeping all person-to-person transfers free irrespective of value, the government said today.

The MDR will be capped at ₹300 on merchant transactions of ₹75,000 and above, according to an NPCI circular issued after the government notified the revised framework.

The move marks a shift from the zero-MDR regime for UPI merchant payments, while shielding smaller transactions and individual transfers from charges.

UPI transactions of up to ₹2,000 will continue to attract zero MDR. Person-to-person transactions, which account for 37% of UPI volumes and 70% of transaction value, will remain free regardless of the amount.

For essential sectors, including railways, telecom, insurance, fuel and agricultural inputs, MDR will be a flat ₹5 per transaction above ₹2,000.

Payments towards mutual funds, securities, stockbrokers and dealers will attract MDR of 0.02%, capped at ₹300.

Small merchants receiving up to ₹100,000 a month through UPI QR codes under the person-to-person-merchant classification will continue to have zero MDR on all transactions.

The government said only around 4% of merchant transactions would be affected by the new charges, as most transactions are below ₹2,000 or fall under the zero-MDR small-merchant framework.

Banks have been advised to ensure merchants do not pass MDR charges on to customers. UPI app providers will also be barred from levying platform fees or other hidden charges.

The government said 5% of total MDR collections will be allocated to a dedicated fund to expand UPI acceptance among small merchants, particularly in rural and semi-urban areas.

The framework follows an amendment to the Payment and Settlement Systems Act, 2007, allowing the government to specify electronic payment modes on which charges may be restricted or prohibited.

The government said the revised structure was aimed at making the UPI ecosystem financially sustainable while keeping the large majority of transactions free.