NPCI Announces 0.4% MDR on High-Value UPI Merchant Transactions Above ₹2,000
The National Payments Corporation of India (NPCI) and the Union Ministry of Finance have introduced a revised regulatory framework for the Unified Payments Interface (UPI) network, introducing a 0.4% Merchant Discount Rate (MDR) on select merchant payments. The new fee structure, set to come into effect on October 15, 2026, will apply exclusively to Person-to-Merchant (P2M) transactions that exceed ₹2,000. Under the guidelines, the fee is capped at ₹300 per transaction for high-value payments of ₹75,000 and above.
To protect everyday consumers and small vendors, the government and NPCI clarified that Person-to-Person (P2P) transfers will remain 100% free of charge regardless of the transaction amount. Furthermore, small merchants who receive up to ₹1 lakh per month through UPI QR codes under the Person-to-Person-Merchant category will be completely exempt from MDR charges. Specific sectors like fuel, railways, telecom, insurance, and agricultural inputs will attract a flat rate of ₹5 for transactions above ₹2,000, while investments in mutual funds and securities will face a minimal 0.02% charge.
The Ministry of Finance reiterated that application providers and banks are strictly barred from passing these charges onto retail consumers or imposing hidden platform fees. Revenue generated from the MDR will be reinvested across the payment ecosystem to improve digital infrastructure, bolster cyber security, and expand merchant acceptance in rural and semi-urban regions across the country.
