Regulatory
UPI MDR: Government Ends Zero-Fee UPI on Large Merchant Payments
11 October 2026 · Mint
The central government announced in September 2026 that UPI merchant transactions above ₹2,000 will attract a 0.4% MDR, capped at ₹300, ending over six years of zero-fee UPI usage. NPCI has clarified in its FAQs that merchants are expected to absorb these nominal digital payment costs, while consumers continue to pay the listed price.
Points to Remember
- % MDR applies on UPI merchant transactions above ₹2,000, capped at ₹300 for payments of ₹75,000 and above.
- Essential and thin-margin sectors — railways, telecommunications, insurance, fuel and agricultural inputs — attract a flat ₹5 MDR per transaction above ₹2,000.
- Capital-market UPI payments (mutual funds, securities, stock brokers, dealers) attract a lower 0.02% MDR, also capped at ₹300 per transaction.
- MDR is borne by merchants, not customers; the government has advised banks to ensure merchants do not pass on MDR charges, and UPI app providers cannot levy platform or hidden fees.
- Reported deferral of the MDR rollout to 1 January 2027 (from 15 October 2026) is based on sources as NPCI has not taken a final decision and no formal announcement has been made.
Why it matters
UPI merchant pricing is set to change for high-value transactions, so customer queries on whether their payments or prices will rise are likely — the answer is that MDR is a merchant cost, not a customer charge. The reported delay to January 2027, if confirmed, gives payment firms and merchants more time to prepare.
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