UPI MDR Charges: If you make daily payments through UPI then this news is useful for you. National Payments Corporation of India (NPCI) has issued a new framework regarding UPI Merchant Discount Rate i.e. MDR. This system will be implemented after 1 month from today i.e. from 15 October 2026. Its purpose is to promote UPI among small merchants and to keep most digital payments of small amounts free. The special thing is that in some services, a fixed MDR of Rs 5 has been fixed on UPI transactions of more than Rs 2000, but this amount will not be taken from the customer, but will have to be paid to the concerned merchant.
Most UPI payments up to Rs 2000 are free
Under the new framework, about 95 percent of low-value UPI transactions below Rs 2000 and P2PM transactions involving small merchants will be free. This means that normally when using UPI for small purchases, the customer will not have to worry about any new charges. NPCI has also proposed a new fund to increase the acceptance of digital payments among small merchants.
What is MDR merchant?
MDR is the fee which is charged from the merchant accepting digital payment, i.e. the person to whom you are paying, like shopkeeper, railway, railway insurance, petrol pump etc. This is not a separate charge to be recovered from the customer. In the new UPI framework, a fixed MDR of Rs 5 has been fixed on eligible transactions of more than Rs 2000 from certain merchant categories.
Which services will attract MDR of Rs 5?
NPCI has made separate arrangements for certain merchant categories. Fixed MDR of Rs 5 per transaction will be applicable on UPI payments above Rs 2000 in services like insurance, railways, telecom and fuel.
Insurance premium- Suppose you pay an insurance premium of Rs 2500 through UPI. If it falls in the prescribed category then MDR of Rs 5 will be applicable. But the customer will not have to pay these Rs 5 separately. MDR will be taken under the arrangement related to merchant.
Rail ticket- If you make rail ticket payment of more than Rs 2000 through UPI, then fixed MDR of Rs 5 will be applicable for railway category also. This does not mean that it will be added separately to your UPI payment at the time of purchasing tickets.
Petrol-Diesel- In the fuel category also, MDR of Rs 5 has been fixed on UPI transactions above Rs 2000. This means that this rule can be applicable on fuel payment of large amount.
Telecom bill- Telecom service is also included in this special category. Fixed MDR of Rs 5 per payment will be applicable on eligible UPI transactions above Rs 2000.
What about normal UPI payments above Rs 2000?
In the new framework, the baseline UPI MDR for transactions above Rs 2000 has been kept at 0.4 percent, while for high-value purchases the maximum limit of MDR is up to Rs 300. However, this arrangement depends on the merchant and the respective category of transaction.
NPCI said in its X post that this initiative will increase the acceptance of UPI, encourage its frequent use and increase the participation of small businessmen in India’s digital payment system.
Regarding Merchant Discount Rate (MDR) on Select UPI (P2M) Transactions
Please refer to the FAQs here: pic.twitter.com/4HMU0YZ2AC
— NPCI (@NPCI_NPCI) September 15, 2026
UPI payment related to credit card is different
This rule does not apply equally to all types of UPI payments. Payments made through UPI linked RuPay credit cards or bank credit lines are subject to separate credit product rules. Therefore, UPI payments made to merchants from ordinary bank accounts and credit-linked UPI payments should not be considered the same.
Overall, UPI for small everyday purchases will remain as easy as before and, in most cases, free. The new changes will mainly affect certain merchant categories and transactions worth more than Rs 2,000.