India will introduce a new Merchant Discount Rate (MDR) framework for select UPI payments from October 15, 2026. The UPI MDR launch will apply to certain Person-to-Merchant (P2M) transactions, while consumers will continue to make UPI payments without paying any charges.
Under the new framework, merchants will pay MDR on eligible transactions above Rs 2,000. The government says the revenue will help support UPI infrastructure, cybersecurity, fraud prevention and future technology upgrades.
UPI MDR Launch: What Changes From October 15?
The new MDR structure will apply to select P2M UPI transactions. The key rates include:
• Transactions up to Rs 2,000 will attract 0% MDR
• Transactions above Rs 2,000 will attract MDR of up to 0.4%
• MDR will be capped at Rs 300 for transactions of Rs 75,000 or more
• A Rs 3,000 payment will attract Rs 12 MDR
• A Rs 50,000 payment will attract Rs 200 MDR
• A Rs 1 lakh payment will attract a maximum MDR of Rs 300
Also Read: RBI Governor Announces Latest UPI Upgrades At Global Fintech Fest 2026
Importantly, the charge will remain on the merchant side. Consumers will not have to pay MDR for UPI payments.
UPI apps also cannot add a separate platform fee, while merchants cannot pass the MDR cost on to customers. Person to Person (P2P) UPI transfers will also remain free.
Small Merchants And Special Categories Get Relief
The UPI MDR launch will also provide protection for small merchants. P2PM merchants receiving up to Rs 1 lakh per month through UPI QR will continue to enjoy 0% MDR.
Existing QR codes and soundboxes will continue to work, and GST registration will not be mandatory for P2PM merchants to qualify for zero MDR. Merchants crossing the Rs 1 lakh monthly limit for three consecutive months may move to the P2M category.
Some sectors will have separate MDR structures:
• Railways, telecom, insurance and fuel: Rs 5 flat MDR above Rs 2,000
• Capital market payments: 0.02%, capped at Rs 300
• Utility payments above Rs 2,000: Rs 5 flat MDR
• Education payments: separate flat or capped rates
The government plans to use MDR revenue for UPI infrastructure, cybersecurity, fraud detection, innovation and merchant expansion. A dedicated fund is also proposed to support small merchants in Tier 3 to Tier 6 cities, the Northeast, Jammu and Kashmir, and Ladakh.
UPI processed 2,451 crore transactions worth Rs 29.9 lakh crore in August 2026. The government says the growing scale of UPI requires a more sustainable funding model, while consumers will continue to pay zero for UPI transactions.
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