New UPI Rules: Who Gets Relief And Who Will Have To Pay The Charge?

New Delhi: The government and NPCI have announced the implementation of the new Merchant Discount Rate (MDR) framework regarding UPI payments. From October 15, 2026, 0.4% MDR will be applicable on Person-to-Merchant (P2M) UPI payments above Rs 2,000. However, this fee will not be charged from the customer but will be taken under the merchant payment ecosystem. The maximum limit of MDR on transactions of Rs 75,000 or more will be Rs 300 per transaction.

Will there be a charge for sending money through UPI?

Person-to-Person UPI transactions done from one person to another will be completely free, no matter the amount. The government has also clarified that UPI app providers will not be able to charge platform fees or hidden charges from any person.

What will happen to UPI payments up to Rs 2,000?

MDR will not be levied on UPI payments up to Rs 2,000 made to merchants. According to the government, a large part of small value transactions come under this scope, so most of the everyday UPI payments will not be affected by the new system.

How much MDR will be charged on payments above Rs 2,000?

MDR has been fixed at 0.4% for amounts above Rs 2,000 on normal P2M transactions. Whereas on transactions of Rs 75,000 or more, this fee will be limited to a maximum of Rs 300 per transaction. For example, on a normal merchant payment of Rs 10,000, the MDR would be Rs 40, while on a payment of Rs 1 lakh, the MDR would be Rs 400 @ 0.4%, but due to the maximum limit, the MDR would be Rs 300.

How much is charged on petrol, insurance and telecom payments?

Separate arrangements have been made for some essential and low margin sectors. UPI payments above Rs 2,000 in categories like railways, telecom, insurance and fuel will attract a flat MDR of Rs 5 instead of 0.4%. Some transactions involving agricultural inputs are also included in this special arrangement.

Will small shopkeepers get discounts?

Small merchants receiving up to Rs 1 lakh per month through UPI QR will continue to enjoy the benefit of zero MDR under the P2PM category. According to the government, this will limit the impact of additional payment costs on small shopkeepers, street vendors and other small businessmen.

Can this charge be recovered from the customer?

The government has advised banks to ensure that merchants do not pass the MDR burden directly on to customers. Also, UPI app providers will not be allowed to charge digital platform fees or hidden charges.

Was the UPI fee structure changed after six years?

Merchant payments in UPI were running under the zero-MDR system for a long time. The new framework aims to make the payments ecosystem sustainable in the long run and support the costs associated with the operation, expansion and security of UPI. The government has said that about 96% of P2M transactions will not be affected by the new arrangement.