NEW DELHI, Sept. 15, 2026: India’s digital payments landscape is set for a significant change, with the National Payments Corporation of India (NPCI) announcing a revised Merchant Discount Rate (MDR) framework for certain Unified Payments Interface (UPI) transactions. The new system will take effect from Oct. 15, 2026.
Under the revised framework, a 0.4% MDR will apply to specified person-to-merchant (P2M) UPI transactions above ₹2,000. The charge will be borne by the merchant rather than directly by the consumer. For transactions of ₹75,000 and above, the MDR will be capped at ₹300 per transaction.
The new framework will not affect person-to-person (P2P) transfers, while P2M payments of up to ₹2,000 will also remain outside the MDR regime. NPCI said more than 95% of P2M UPI transactions fall within the ₹2,000-and-below category, meaning most everyday UPI payments will continue without MDR.
Small Merchants to Remain Protected
Small merchants will continue to benefit from zero MDR under the P2PM category. This includes eligible small sellers receiving up to ₹1 lakh a month through UPI QR-code payments directly into their bank accounts.
For certain sectors, including railways, telecommunications, insurance and fuel, transactions above ₹2,000 will attract a flat ₹5 MDR per transaction instead of the percentage-based charge.
New Fund Proposed to Expand Digital Payments
The revised framework also provides for a dedicated mechanism to support the expansion of UPI infrastructure and bring more small businesses, particularly those in Tier-3 and smaller markets, into the digital payments ecosystem.
A portion of MDR revenue will be used to support ecosystem participants and investments aimed at expanding UPI adoption, strengthening cybersecurity, improving system capacity and encouraging technological innovation.
The move comes after concerns over the financial sustainability of the UPI ecosystem following years of zero-charge merchant payments. NPCI has said the revised MDR is intended to support the long-term sustainability of the platform while keeping everyday digital payments affordable.
UPI apps will continue to be barred from imposing additional platform fees on users, according to the announced framework.
.jpeg)
