On 16 September 2026, the Finance Ministry of India announced that UPI merchant transactions above ₹2,000 will attract a 0.4% fee.
- Rate: 0.4% MDR on Person-to-Merchant (P2M) transactions above ₹2,000.
- Cap: ₹300 per transaction for payments of ₹75,000 and above.
- Effective Date: 15 October 2026.
- Applicability: Only for merchant payments (PhonePe, Paytm, Google Pay, etc.).
Exemptions:
- Person-to-Person (P2P) transfers remain free.
- Small merchants earning up to ₹1 lakh/month via UPI QR codes are exempt.
- Essential sectors (railways, telecom, fuel, utilities) have a flat ₹5 MDR.
💡 What is UPI?
- UPI (Unified Payments Interface) is a real-time payment system launched in 2016 by NPCI (National Payments Corporation of India).
- It enables instant money transfers via mobile apps using:
- Virtual Payment Address (VPA)
- Mobile number
- QR codes
- Operates on IMPS infrastructure, available 24×7.
🎯 Purpose of the Fee
- Cost Recovery: To cover infrastructure and settlement costs for high-value merchant transactions.
- Encourage Digital Payments: Keeps small-value transactions free to promote everyday usage.
- Balance for Merchants: Fee is far lower than debit/credit card MDR (Merchant Discount Rate).
- Sustainability: Ensures long-term viability of UPI ecosystem.
