This comes after CNBC-TV18 reported earlier in the day that the NPCI steering committee was set to discuss MDR for large UPI transactions, with the industry expecting a levy of around 40 basis points on payments above ₹2,000.
Why is MDR being introduced on UPI transactions now?
NPCI said UPI processes billions of transactions every month and that MDR, which will be distributed within the UPI ecosystem, will help fund investments in infrastructure resilience, innovation, cybersecurity and customer service.
The charges will remain lower than those applicable to other payment instruments, such as credit cards, debit cards and wallets. MDR will apply only to eligible transactions above ₹2,000, allowing UPI to remain an affordable payment-acceptance option.
What is the standard MDR for UPI P2M transactions?
An MDR of 0.4% will apply to eligible UPI P2M transactions above ₹2,000. For transactions of ₹75,000 or more, the charge will be capped at ₹300 per transaction.
Which categories will attract a flat ₹5 MDR?
Certain merchant categories, including railways, telecom services, insurance and fuel, will attract a flat MDR of ₹5 per transaction for payments above ₹2,000, irrespective of the transaction value.
NPCI said the concessional flat-rate structure is intended to prevent cost escalation in critical public services, utility bill collections and thin-margin sectors such as fuel retail.
Will insurance premium payments via UPI attract the flat rate?
Yes. Insurance premium payments above ₹2,000 will attract a flat MDR of ₹5 per transaction instead of the percentage-based charge. This is intended to prevent high-value annual or semi-annual premium payments from attracting a higher backend fee.
How will fuel purchases at petrol pumps be treated?
UPI payments for fuel purchases above ₹2,000 will attract the concessional flat MDR of ₹5 per transaction. Payments of ₹2,000 or less will continue to carry zero MDR.
Will utility bill payments attract the percentage-based MDR?
No. Public utility payments, including electricity, municipal water charges and piped natural gas, will fall under the designated industry programme category.
Utility payments above ₹2,000 will attract a flat MDR of ₹5 instead of the variable 0.4% rate, while transactions of ₹2,000 or less will carry zero MDR.
Are educational institutions covered under the flat-rate structure?
Yes. Educational fee collections, including school tuition, university term fees and institutional entrance examinations, will fall under the designated industry programme category.
Transactions above ₹2,000 will be eligible for flat-fee structures or capped processing rates, while transactions of ₹2,000 or less will remain free of MDR.
When will the updated MDR provisions take effect?
The finalised MDR framework and threshold structure will come into effect on October 15, 2026. This will give acquiring banks, payment aggregators, fintech applications and corporate accounting platforms time to update their software and billing systems.
Will ordinary consumers be charged the ₹5 fee?
No. NPCI has clarified that UPI will remain free for consumers. Merchants covered by the framework cannot pass on MDR charges, including the flat ₹5 fee, to customers.
How does UPI MDR compare with debit and credit card charges?
Standard credit card MDRs typically range from 1.5% to 2.5% per transaction, while debit card MDRs can be as high as 0.90%.
By comparison, the standard UPI MDR will be 0.4% for eligible transactions above ₹2,000, with a maximum charge of ₹300 for transactions of ₹75,000 or more. NPCI said this would keep UPI among the most affordable digital payment-acceptance options for businesses.
How does UPI MDR compare with international payment systems?
NPCI said most global payment systems, including digital public infrastructures, have commercial models that support investment in infrastructure and innovation. India’s approach, it added, continues to focus on accessibility, scale and financial inclusion.
Who will decide the implementation and enforcement of MDR caps?
The operational parameters, fee-distribution models and category-specific caps will be decided by the UPI and Services Steering Committee, headed by NPCI.
What is the proposed dedicated fund for small merchants?
A dedicated fund will be created to support and expand digital-payment infrastructure in Tier 3–6 centres, including the northeastern states, Jammu and Kashmir and Ladakh. It will also support eligible initiatives in Tier 1 and Tier 2 centres under notified central government schemes, including PM SVANidhi and PM Vishwakarma.
The fund will provide financial assistance to ecosystem players for merchant onboarding and encourage UPI transaction growth among existing small merchants. The fund will support UPI acceptance among small merchants by providing assistance to acquiring banks and payment aggregators for onboarding, along with incentives for transactions originating from small merchants in rural areas and Tier III centres and beyond.
NPCI said the detailed framework would be finalised in consultation with the Reserve Bank of India (RBI) within three months.
Why is government support alone no longer sufficient?
Government incentives were designed as short-term bridge funding rather than a permanent source of support, NPCI said.
Industry estimates suggest that operating UPI — including server bandwidth, fraud-prevention systems, payment infrastructure and technical support from banks — costs around ₹20,000 crore annually. A threshold-based commercial model, NPCI said, would provide a more reliable source of funding for technological upgrades and long-term resilience.
How could MDR affect competition among payment-app operators?
NPCI said a sustainable commercial model could encourage more fintech startups and technology companies to enter the digital-payments market.
Under a zero-MDR model, smaller players may find it difficult to absorb prolonged operating losses. A predictable revenue framework could therefore create a more level playing field for new and smaller entrants.
Will UPI person-to-person transactions attract a charge?
No. Person-to-person (P2P) UPI transactions will remain free for both the payer and the beneficiary. This also includes self-transfers between a user’s linked bank accounts.
UPI app providers will not be permitted to charge a platform fee or any other fee for payments made through UPI.
Will consumers be charged for scanning a QR code at a local shop?
No. Consumers will not be charged for scanning a QR code and making a UPI payment at local markets, street vendors or retail shops. The MDR, where applicable, will be charged within the merchant-side payment ecosystem and cannot be passed on to customers.
Does MDR apply to recurring UPI payments and AutoPay mandates?
NPCI has clarified that recurring payments made through UPI mandates or AutoPay, including certain utility-bill and subscription payments, will not attract the prescribed MDR transaction charges.
Will small local vendors covered under P2PM pay MDR?
Small merchants classified under the person-to-person-merchant (P2PM) framework and receiving up to ₹1 lakh per month through UPI QR codes directly into their accounts will continue to receive zero-MDR treatment.
Do small merchants need to replace their existing QR codes?
No. Existing QR infrastructure, including physical QR stands and soundboxes, will continue to work. Merchants will not need to replace their QR codes or undergo fresh registration solely because of the MDR framework.
What happens if a small merchant receives a payment above ₹2,000?
MDR eligibility will depend on the merchant’s overall account classification. A single payment above ₹2,000 will not automatically trigger MDR for a small merchant operating under an exempt category such as P2PM.
Is GST registration required to qualify for zero MDR under P2PM?
No. Eligibility under the P2PM category will be based on the applicable monthly collection threshold, including the ₹1 lakh limit, rather than GST registration status.
How will acquiring banks identify eligible small merchants?
Acquiring banks and payment service providers will monitor merchants’ inward UPI collections against the applicable threshold.
Merchants receiving more than ₹1 lakh per month for three consecutive months will be moved from the P2PM category to the P2M category, subject to the prescribed classification process.
Does zero MDR apply to QR payments accepted by rural merchants?
Yes. QR-code payments received by eligible P2PM merchants in rural and semi-urban areas will continue to attract zero MDR. Such merchants may also receive support through the proposed dedicated payment-promotion fund.
Is there a maximum MDR cap for high-value UPI payments?
Yes. MDR will be capped at ₹300 per transaction for eligible payments of ₹75,000 or more.
For example, a ₹1 lakh payment would generate an MDR of ₹400 at the standard 0.4% rate. However, because of the cap, the applicable MDR would be limited to ₹300.
How will MDR be calculated?
₹3,000 payment: 0.4% MDR = ₹12
₹50,000 payment: 0.4% MDR = ₹200
₹1 lakh payment: 0.4% MDR = ₹400, but the ₹300 cap applies
Payment of ₹2,000 or less: Zero MDR
The applicable charge will be borne by the eligible merchant and cannot be passed on to the customer.
Can enterprise merchants pass MDR on to buyers?
No. Merchants covered by the framework cannot pass MDR charges on to customers while accepting UPI payments. Consumers will continue to pay only the listed purchase price.
Does MDR apply to credit cards or credit lines linked to UPI?
No. Credit-linked UPI payments, including RuPay credit cards linked to UPI and pre-sanctioned bank credit lines, operate under separate rules because they involve credit extended by the issuing bank.
The MDR framework discussed here applies to direct UPI payments from a user’s bank account to a merchant’s bank account.
What MDR will apply to capital-market transactions through UPI?
Capital-market transactions, including payments towards mutual funds, securities, stockbrokers and dealers, will attract an MDR of 0.02% of the transaction value, subject to a maximum charge of ₹300.
Which entities and transactions are covered under the capital-market MDR framework?
The framework will cover regulated capital-market entities, including asset management companies, SEBI-registered stockbrokers, securities dealers and investment platforms.
It will apply to UPI payments for activities such as equity purchases, debt-market investments, mutual-fund purchases and broker wallet top-ups.
