UPI MDR Rules 2026: 0.4% Fee, ₹2,000 Limit and Start Date

New UPI MDR charges start on 15 October 2026. Under NPCI's FAQ on Merchant Discount Rate (MDR) for select Person-to-Merchant (P2M) UPI transactions, eligible merchant payments above ₹2,000 will carry a 0.4% MDR. For payments of ₹75,000 or more, the charge is capped at ₹300 per transaction.

The fee is paid by the merchant, not the customer. UPI payments up to and including ₹2,000 remain charge-free, and small merchants in the P2PM category remain exempt under the FAQ's monthly collection criteria. The document also sets out lower flat or percentage rates for selected sectors. Here is how the new UPI MDR rules work and what businesses should check before the 15 October start date.

UPI MDR rates from 15 October 2026

For standard eligible P2M UPI payments, the FAQ sets out this schedule:

• ₹2,000 or less: zero MDR.
• Above ₹2,000 and below ₹75,000: 0.4% of the transaction amount.
• ₹75,000 or more: 0.4%, subject to a maximum charge of ₹300 per transaction.

The cap applies to each transaction. For example, a ₹3,000 payment produces an MDR of ₹12, and a ₹50,000 payment produces an MDR of ₹200. A ₹75,000 payment calculates to ₹300; a ₹1,00,000 payment would calculate to ₹400 at 0.4%, but the ₹300 cap brings the charge down to ₹300.

The FAQ gives 15 October 2026 as the date the updated MDR framework and transaction thresholds take effect. It describes the covered transactions as P2M payments, meaning a customer paying a business. This is not a charge on every UPI transfer.

Who pays UPI MDR: the customer or the merchant?

The merchant pays MDR to its acquiring bank or payment provider. The FAQ says a merchant must not pass this fee to the buyer as an extra UPI charge. Customers can continue making UPI payments without a transaction fee, and UPI apps cannot add their own platform fee for a UPI payment.

Person-to-Person (P2P) UPI transfers remain free for both sender and recipient, including self-transfers between a person's own linked accounts. The FAQ also says recurring UPI AutoPay mandates do not attract this prescribed MDR. Normal bank or NPCI security limits can still apply; those are transaction controls, not monthly fee tiers.

The September 2026 Gazette notification separately protects UPI payments of ₹2,000 or less from direct or indirect charges imposed by banks or payment system providers. It also protects RuPay-powered debit-card payments. Search the official e-Gazette of India for S.O. 5067(E), dated 14 September 2026, Gazette ID CG-DL-E-14092026-276170. The Finance Ministry's UPI charges clarification explains its stated position on customer charges, P2P payments and merchant MDR.

Do small merchants have to pay MDR?

The FAQ says micro-merchants onboarded in the P2PM category continue to receive payments with zero MDR. It describes P2PM vendors as small sellers receiving UPI QR payments directly into their accounts, with inward UPI collections of up to ₹1 lakh per month.

Under the FAQ, a payment above ₹2,000 does not by itself make a P2PM merchant liable for MDR. The merchant's account classification matters: a P2PM vendor remains exempt while the account is within that category. Acquiring banks and payment providers monitor inward collections; the document says merchants exceeding ₹1 lakh per month for three consecutive months may be moved to the P2M category.

This makes it important to ask your bank or QR provider which category your merchant ID is in and how it will be monitored. Do not assume that every small shop is automatically tagged P2PM.

Special UPI MDR rates by merchant category

Some types of merchant payments use a special fee instead of the standard 0.4% rate:

• Railways, telecom, insurance and fuel: the FAQ lists a flat MDR of ₹5 for transactions above ₹2,000 in these and other designated industry-program categories.
• Public utility bills: electricity, water and piped-gas payments above ₹2,000 are also listed at a flat ₹5; payments up to ₹2,000 have zero MDR.
• Capital-market payments: mutual funds, securities, stockbrokers and dealers are listed at 0.02% of the transaction value, capped at ₹300.
• Education payments: the FAQ describes flat-fee or capped structures for larger education payments but does not give one exact rate in that answer. Institutions should confirm their applicable category and charge with their acquiring bank.

The industry category assigned to a merchant matters. Two businesses processing the same transaction amount may have different MDR if one is onboarded under a designated special category. Ask your provider to confirm the category and rate in writing.

What about RuPay credit cards and UPI AutoPay?

The FAQ separates standard bank-account-to-merchant UPI payments from credit-linked UPI. Payments funded by a RuPay credit card linked to UPI or by a pre-sanctioned credit line are described as credit products with their own applicable rules; they are not included in this standard 0.4% UPI MDR schedule.

It also states that UPI AutoPay mandates, including recurring bill or subscription payments, do not carry the prescribed MDR. If your business accepts credit-linked UPI or recurring mandates, have your provider identify those transactions separately on its tariff and settlement reports.

Why is UPI MDR being introduced?

The rationale in the NPCI FAQ is to fund investment in UPI infrastructure, system resilience, cybersecurity, innovation and customer support. It argues that a charge limited to larger merchant payments can support the payment ecosystem while keeping everyday low-value UPI payments free.

The FAQ also describes a proposed support fund for merchant onboarding and UPI growth among small merchants, particularly in rural areas and smaller centres. The detailed framework is to be finalised in consultation with the Reserve Bank of India. Small merchants should look for the final eligibility and claim process before assuming that a specific incentive is available.

The FAQ says the UPI and Services Steering Committee, headed by NPCI, oversees operational parameters and fee distribution. For later implementation updates, check NPCI's UPI circulars and ask your provider for the tariff attached to your merchant category.

How to prepare your business for UPI MDR

Before 15 October, ask your acquiring bank, QR provider or payment aggregator to confirm these details in writing:

1. Your merchant category: Is your merchant ID P2PM, standard P2M, or a designated industry-program category?
2. Your applicable rate: Does your account use the 0.4% rate, a ₹5 flat fee, the 0.02% capital-market rate, or a separate credit-linked tariff?
3. The ₹300 cap: How will the cap be shown on settlements for transactions of ₹75,000 or more?
4. Settlement and refunds: Where will MDR appear in settlement reports, and how will reversals, refunds and failed transactions be handled?
5. Customer receipts: Confirm that the merchant-side MDR will not be added as a separate UPI fee for the customer.

Keep your UPI references attached to sales orders and invoices, and reconcile daily collections against provider settlement reports. This will help you spot a fee applied to the wrong payment type or merchant category. A business QR can make collections and refunds easier to track; you can create a printable code with the UPI QR Code Generator. Businesses that issue invoices can match each payment reference to a sales document with the GST Invoice Generator.

UPI MDR 2026: frequently asked questions

When do the new UPI MDR charges start?

The NPCI FAQ gives 15 October 2026 as the effective date for the updated MDR framework and thresholds.

What is the UPI MDR rate above ₹2,000?

The standard rate for eligible P2M UPI transactions is 0.4%. For transactions of ₹75,000 or more, the fee is capped at ₹300 per transaction.

Is there MDR on a ₹2,000 UPI payment?

No. Payments of exactly ₹2,000 or less remain at zero MDR. The standard MDR applies to transactions above ₹2,000, subject to the merchant's category and any applicable exemption.

Does the MDR apply to every UPI user or every UPI transfer?

No. The new schedule applies to eligible P2M merchant transactions. Customers do not pay the fee, P2P payments remain free, and the FAQ says UPI AutoPay mandates have no prescribed MDR.

Are small QR-code merchants exempt?

The FAQ says merchants onboarded in the P2PM category remain at zero MDR, including when an individual payment exceeds ₹2,000. It ties P2PM to merchant account classification and inward monthly collections of up to ₹1 lakh. Ask your acquiring bank or payment provider to confirm your status.

Is UPI MDR the same for fuel, insurance, utility bills and capital markets?

No. The FAQ lists ₹5 flat MDR for some designated industry-program categories above ₹2,000 and a 0.02% rate capped at ₹300 for capital-market transactions. The exact fee depends on the merchant category assigned by the provider.

What UPI merchants and customers should remember

From 15 October 2026, the standard UPI MDR is 0.4% on eligible merchant payments above ₹2,000, capped at ₹300 for transactions of ₹75,000 or more. Small P2PM merchants remain exempt under the FAQ's category rules, selected sectors have special rates, and customers are not to be charged the merchant's MDR.

Keep accepting UPI, confirm your account category with your acquiring bank and check your settlement statements after the effective date. Payment terms can vary by merchant category and can change, so rely on current official guidance and your provider's written tariff before adjusting your business forecasts.