After years of a zero-fee model that helped Unified Payments Interface become everyday infrastructure, the government and NPCI have drawn a clear line: consumers still pay nothing. Merchants will, but only on a sliver of transactions, and only from mid-October.
The new Merchant Discount Rate (MDR) framework takes effect on October 15, 2026. It does not put a fee on the person scanning a QR code or sending money to a friend. It puts a processing charge on the business receiving certain person-to-merchant (P2M) payments above ₹2,000.
That distinction matters. Confusion over “UPI charges” has often mixed up what banks and payment companies charge merchants with what users see on their phone. Officials have now said both things in plain language: no transaction fee, no platform fee, and no other levy on individuals sending or receiving money through UPI.
What stays free
All person-to-person (P2P) transfers, any amount - family, friends, splitting a bill, or moving money between your own linked accounts.
Every P2M payment of ₹2,000 or less. Officials say this is more than 95% of merchant-side UPI volume.
Small merchants classified as P2PM - typically street vendors and neighbourhood shops receiving up to ₹1 lakh a month through UPI QR Pay zero MDR on receipts, regardless of ticket size.
UPI apps are barred from adding a platform fee or any extra charge for making a UPI payment.
Banks have been told to ensure merchants do not add the MDR onto the customer’s bill. You pay the listed price. The charge is MDR: a fee the merchant’s acquiring bank collects and that is shared across banks, payment aggregators and app providers. It is not a tax and is not collected by the government.
For ordinary P2M UPI payments above ₹2,000, the merchant pays 0.4% of the transaction value. For payments of ₹75,000 and above, that fee is capped at ₹300 per transaction.
Examples of what the merchant pays (customer still pays ₹0 extra):
- ₹3,000 purchase → ₹12
- ₹5,000 purchase → ₹20
- ₹10,000 purchase → ₹40
- ₹50,000 purchase → ₹200
- ₹1,00,000 purchase → ₹300 (cap applies; 0.4% would have been ₹400)
Flat ₹5, not 0.4%, in notified thin-margin and public-service categories. On payments above ₹2,000 in these categories, the merchant pays a flat ₹5 per transaction, whatever the amount:
- Railways
- Telecom
- Insurance
- Fuel / petrol pumps
- Utility collections (electricity, water, piped gas, as listed in the framework)
- Educational fees (as included in several official summaries)
- Agricultural inputs
A ₹8,000 railway ticket or a ₹12,000 fuel bill still costs the customer the same amount. The operator’s side is billed ₹5. UPI payments to mutual funds, stockbrokers, securities dealers and similar investment platforms attract 0.02%, also capped at ₹300. A ₹1 lakh investment payment would cost the recipient ₹20 in MDR, not ₹400. Recurring mandates (AutoPay for utilities, subscriptions, SIPs) have not been given a separate prescribed MDR in the public summaries of the framework.
It is not a fee that appears on your UPI confirmation screen. It is not a new cap on how much you can send. It is not permission for Google Pay, PhonePe, Paytm or bank apps to start charging you for “using UPI.” Those apps remain prohibited from platform fees on UPI payments.
It is also not the same as credit-card MDR (often 1.5–2.5%) or the older debit-card caps. Authorities have framed 0.4% with a ₹300 ceiling as a lower, more predictable cost than cards, meant to keep the network funded after years in which banks and processors absorbed the operating bill.
