New Delhi, September 15 (IANS). National Payments Corporation of India (NPCI) on Tuesday announced that it has made changes to the merchant discount rate (MDR) framework for select UPI transactions. Under this, charges will be levied on some merchant payments above Rs 2,000, while zero MDR will continue for small merchants and low value transactions.
This MDR framework will come into effect from October 15, 2026, while UPI transactions will continue to be free for customers. In this, low-value UPI person-to-merchant (P2M) transactions with payments up to Rs 2,000 have been kept out of the scope of MDR.
Under the new rule, an MDR of 0.4 percent will be levied on certain P2M UPI transactions above Rs 2,000. The maximum limit of MDR will be Rs 300 per transaction. UPI payments above Rs 2,000 in select merchant categories like Railways, Telecom Services, Insurance and Fuel will be charged a flat MDR of Rs 5 per transaction.
Person-to-person (P2P) UPI transactions will remain free as before and P2M transactions up to Rs 2,000 will also remain outside the purview of the MDR framework. This means that customers will continue to use UPI without paying any transaction charges.
Small merchants operating under the Person-to-Person Merchant (P2PM) framework will continue to enjoy the benefit of zero MDR. This category includes small vendors who receive up to Rs 1 lakh every month directly into their bank accounts through UPI QR payment. This helps in greater adoption of digital payments in the unorganized retail sector.
The revised framework also proposes to create a special fund to expand the use of UPI among small merchants, especially in existing merchant networks and Tier-3 and smaller markets. The aim of this initiative is to strengthen the digital payment infrastructure and encourage more small businesses to adopt UPI.
As per the framework, MDR collected on high-value transactions will be shared among all players associated with the UPI ecosystem. This move will encourage investment in areas such as payments infrastructure, robustness, cyber security and innovation, and will also help in increasing the adoption of UPI among new users and merchants.
–IANS
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