UPI MDR from Oct 15: 0.4% on select payments; ₹5 on railways, telecom, insurance & fuel; capital markets at 0.02%

The way Indians pay through UPI is set to change from October 15, 2026, but not in the way many consumers may fear. The National Payments Corporation of India (NPCI) has introduced a revised merchant discount rate (MDR) framework for select UPI Person-to-Merchant (P2M) transactions.

The most important point for the common user: you will not be charged for making a UPI payment. There will be no platform fee from UPI apps, while person-to-person (P2P) transfers will remain free irrespective of the amount.

What happens to payments above ₹2,000?

For standard P2M transactions above ₹2,000, the MDR will be 0.4% of the transaction value. The charge will be borne by the merchant, not the customer. For transactions of ₹75,000 and above, the MDR will be capped at ₹300.

For example, a ₹3,000 purchase would attract an MDR of ₹12, while a ₹50,000 transaction would attract ₹200. A ₹1 lakh transaction, which would otherwise attract ₹400 at 0.4%, will be capped at ₹300.

However, some important categories get a much lower flat fee.

Payments above ₹2,000 for services such as railways, telecom, insurance and fuel will attract a flat ₹5 MDR, instead of the 0.4% rate. Utility payments such as electricity, water and piped natural gas also fall under the designated industry programme category and attract a ₹5 fee above ₹2,000, according to the NPCI FAQ.

Capital-market payments get a special 0.02% rate

One of the biggest exceptions is capital-market transactions. Payments through UPI for mutual funds, securities, stockbrokers, dealers and investment platforms will attract MDR of just 0.02%, subject to a maximum of ₹300.

That means a ₹50,000 capital-market payment would carry an MDR of only ₹10, compared with ₹200 under the standard 0.4% rate.

Everyday UPI payments remain free

The framework is designed to leave everyday digital payments untouched. Transactions of ₹2,000 or below remain free, accounting for more than 95% of P2M transaction volume, according to NPCI.

Small merchants classified under the P2PM framework, including vendors receiving up to ₹1 lakh a month through UPI QR payments, will also continue to enjoy zero MDR. Even if such a merchant receives an individual payment above ₹2,000, the payment does not automatically become chargeable.

In short: UPI is not becoming a paid service for consumers. NPCI says the MDR revenue will stay within the UPI ecosystem and support infrastructure, cybersecurity, innovation and customer service, while a dedicated fund is proposed to promote digital payments among small merchants.