India’s popular Unified Payments Interface (UPI) payment system is set for a major change from October 15, 2026. The National Payments Corporation of India (NPCI) will introduce a new Merchant Discount Rate (MDR) on certain UPI payments made to businesses. However, consumers should note that the new charge is not a direct fee on their UPI payments.
Here are 10 important things every UPI user should know.
1. UPI will not become a paid service for consumers
The new MDR is a charge imposed within the merchant-payment ecosystem. Customers will continue to make eligible UPI payments without paying an additional transaction fee. Banks and UPI providers have been advised not to pass the MDR directly to customers.
2. The new rule starts on October 15
The revised framework will come into effect from October 15, 2026. It applies to specified person-to-merchant (P2M) transactions rather than all UPI payments.
3. Payments above ₹2,000 are covered
Certain merchant transactions exceeding ₹2,000 will attract an MDR of 0.4%. For example, on a ₹3,000 eligible merchant payment, the MDR would be ₹12, but the customer still pays ₹3,000.
4. There is a maximum cap
For eligible transactions of ₹75,000 and above, the 0.4% MDR is capped at ₹300 per transaction. This prevents the percentage-based fee from increasing indefinitely on larger payments.
5. Person-to-person payments remain free
If you transfer money to a friend, family member or another individual through UPI, the new MDR does not apply. P2P transactions remain free, irrespective of the amount transferred.
6. Payments up to ₹2,000 remain exempt
Merchant payments of ₹2,000 or less remain outside the new MDR framework. This means routine purchases and smaller QR-code payments will continue without the new merchant charge.
7. Small merchants get an exemption
Small merchants receiving up to ₹1 lakh per month through UPI QR payments will continue to operate under zero MDR, according to the new framework.
8. Some sectors have special rates
Certain categories, including railways, fuel, telecom and insurance, have specific fee arrangements, including a flat ₹5 charge for applicable transactions rather than the standard 0.4% rate.
9. RuPay debit-card payments remain exempt
The Finance Ministry has stated that UPI transactions up to ₹2,000 and RuPay debit-card transactions will remain exempt from the applicable charges.
10. UPI apps cannot simply add a new user fee
The key takeaway for consumers is that the MDR should not appear as a separate charge on their UPI payment. The new framework is aimed at creating a revenue mechanism within the merchant-payment ecosystem while supporting UPI infrastructure and cybersecurity.
What UPI Users Should Remember
From October 15, users can continue using UPI for everyday payments without worrying about a blanket transaction fee. The major change concerns eligible merchant transactions above ₹2,000, where the cost is borne within the merchant ecosystem.
Consumers should nevertheless check payment details before completing transactions, particularly for large commercial payments and services with sector-specific fee structures.
