India’s UPI ecosystem is moving toward a new commercial framework. From October 15, 2026, specified person-to-merchant (P2M) transactions above ₹2,000 will attract a 0.4% Merchant Discount Rate (MDR), capped at ₹300. The charge will be borne by merchants, not consumers.
Crucially, person-to-person UPI transfers remain completely free regardless of value. Merchant payments up to ₹2,000 and eligible small-merchants transactions will also remain free. The Finance Ministry says approximately 96% of P2M transactions will remain unaffected.
For sectors including railways, telecom, insurance and fuel, a flat ₹5 MDR will apply to payments above ₹2,000. Small merchants receiving up to ₹1 lakh monthly through UPI QR payments are exempt.
The government has clarified that MDR is not a tax. The revenue will be distributed among banks and payment-app providers to support UPI infrastructure, cybersecurity and expansion.
The change marks an important transition: UPI remains free for consumers while introducing a sustainability model for the ecosystem supporting its massive scale.
