India’s Unified Payments Interface (UPI) is set to enter a new charging regime from October 15, with a Merchant Discount Rate (MDR) on select high-value person-to-merchant transactions. Under the new framework, merchants will pay 0.4% on eligible UPI payments above ₹2,000. The charge will be capped at ₹300 for transactions of ₹75,000 or more.
MDR is a processing fee paid within the merchant payments ecosystem, rather than a direct charge imposed on customers. The new framework is intended to create a sustainable commercial model for UPI while supporting its infrastructure and expansion.
Small merchants under the specified zero-MDR category will remain protected from the levy. Person-to-person transfers between individuals will also remain free, while UPI payments up to ₹2,000 will not attract the new MDR.
Certain categories will have a flat ₹5 charge on eligible transactions above ₹2,000. These include fuel, railways, insurance and utility-related payments, according to the notified framework. The charge applies within the merchant payment system, and consumers will not be directly billed for the MDR.
The revised structure marks a significant change after UPI operated without MDR for several years. Acquiring banks, fintech platforms and other participants in the payment chain will share the applicable fee.
The changes are expected to affect merchants handling higher-value digital payments, while everyday small-value users will continue using UPI without an additional payment charge. The new framework separates consumer-facing payment costs from merchant-side processing fees as India’s digital payments ecosystem expands. The policy keeps digital payments accessible for everyday users.
