UPI MDR From October 15: Check Transaction-Wise Rates, Exemptions and What Changes
New Delhi: A revised Merchant Discount Rate (MDR) framework for selected Unified Payments Interface (UPI) transactions is set to come into effect from October 15, 2026.
However, the revised framework does not mean that UPI payments will become chargeable for everyone. Person-to-person (P2P) payments will remain free, while payments of up to ₹2,000 made to merchants will also remain outside the MDR framework.
The new structure mainly applies to selected person-to-merchant (P2M) transactions above ₹2,000, with different rates for certain sectors and payment categories.
UPI MDR: What Is Changing From October 15?
Under the revised framework, MDR will apply only to specified merchant transactions. The government has also clarified that customers will not directly pay MDR for making UPI payments.
The MDR is a charge within the payment ecosystem and is shared among participating entities such as banks, payment service providers and UPI application providers.
UPI MDR Rates by Transaction Type
| Transaction Category | MDR | Key Condition |
|---|---|---|
| P2P Payments | Zero | Remains free irrespective of transaction value |
| Regular P2M | 0.4% | For merchant transactions above ₹2,000 |
| High-value P2M | 0.4%, capped at ₹300 | Transactions of ₹75,000 and above |
| Essential Sectors | ₹5 flat | Above ₹2,000 in specified sectors |
| Capital Markets | 0.02%, capped at ₹300 | Specified securities, mutual fund and stockbroking transactions |
Which Transactions Will Remain Free?
A large portion of UPI transactions will continue to remain outside the MDR framework.
- All P2P transactions will remain free.
- Merchant payments up to ₹2,000 will attract zero MDR.
- Small merchants covered under the zero-MDR framework will continue to receive the benefit.
- Small merchants receiving up to ₹1 lakh per month through UPI QR payments under the specified P2PM category will remain outside MDR.
- Automated recurring payments through e-mandates will remain outside the MDR framework.
What About Small Merchants?
The revised framework provides a specific zero-MDR protection for small merchants.
Merchants receiving up to ₹1 lakh per month through UPI QR payments under the applicable small-merchant category will continue to receive zero-MDR treatment.
This is intended to protect street vendors, neighbourhood shops and other small businesses from additional payment-related costs.
₹5 MDR for Essential Sectors
Some essential and relatively low-margin sectors will follow a separate flat-rate structure.
These include areas such as:
- Railways
- Telecom
- Insurance
- Fuel
- Agricultural inputs
For specified transactions above ₹2,000 in these categories, the MDR will be ₹5 per transaction instead of the standard 0.4% rate.
Lower MDR for Capital Market Transactions
Transactions associated with capital-market activities will have a lower MDR rate of 0.02%, subject to a maximum of ₹300 per transaction.
The category includes payments associated with areas such as mutual funds, securities, stockbrokers and dealers.
Will Customers Have to Pay UPI MDR?
No. The revised MDR is not a direct transaction fee that customers have to pay when they make an eligible UPI payment.
The government has stated that UPI service providers should not pass the MDR directly to customers as a separate payment charge.
Therefore, users should continue to be able to make UPI payments without paying an additional MDR at checkout.
Why Is MDR Being Introduced?
The revised framework is aimed at creating a more sustainable financial model for the UPI payment ecosystem.
According to the government, the payment ecosystem involves significant costs related to infrastructure, technology, cybersecurity, fraud prevention, server capacity and technical support.
The MDR collected from applicable merchant transactions will be distributed among participants in the UPI ecosystem to support infrastructure, innovation, security and customer services.
UPI MDR: Key Takeaways
- P2P UPI payments remain free.
- UPI merchant payments up to ₹2,000 remain zero-MDR.
- Regular P2M payments above ₹2,000 attract 0.4% MDR.
- MDR on ₹75,000 and above transactions is capped at ₹300.
- Specified essential sectors have a flat ₹5 MDR above ₹2,000.
- Capital-market transactions have 0.02% MDR, capped at ₹300.
- Eligible small merchants up to ₹1 lakh monthly UPI QR receipts remain under zero-MDR provisions.
- Customers do not directly pay MDR.
- Recurring e-mandate payments remain outside the MDR framework.
Bottom Line
The revised UPI MDR framework does not introduce a blanket charge on UPI payments. Instead, it targets specific higher-value merchant transactions while keeping P2P payments, low-value merchant payments and eligible small merchants under zero-MDR provisions.
The framework is designed to provide a funding mechanism for the growing UPI ecosystem while limiting the impact on ordinary users and small businesses.
Sources: Zee News; Press Information Bureau (PIB)
Comments
Post a Comment