New Delhi: The new fee structure for UPI, which is one of the largest means of digital payment in the country, is going to be implemented from October 15, 2026. Many types of information and misconceptions are emerging on social media regarding this. In such a situation, it is important to understand that after the new rule, there will be no charge on every UPI transaction. Person to person i.e. P2P payment will remain free as before.
If you send money to your friend, family or any other person through UPI, no matter the amount, the new MDR will not be applicable on it. Under the new framework, the prescribed MDR has been applied only on eligible Person-to-Merchant (P2M) payments.
MDR will not be applicable on purchases up to Rs 2000
If you pay up to ₹2,000 through UPI to a merchant or merchant, there will be no MDR on eligible P2M transactions. This means that customers using UPI for small everyday purchases will not have to pay any separate UPI fee due to this change.
Apart from this, the system of zero-MDR will also be applicable for eligible small merchants who fulfill the prescribed eligibility conditions.
What will happen on UPI payment of more than Rs 2000?
Under the new rules, 0.4 percent MDR will be applicable on eligible P2M UPI transactions above ₹2,000. This fee will not be charged separately from the customer, but will be applicable on the merchant side.
For example, if a payment of ₹4,000 is made to an eligible merchant through UPI, the MDR @ 0.4 per cent will be ₹16. The customer has to pay only ₹4,000 as payment amount; MDR is a fee associated with merchant payment settlement.
Cap of ₹300 above 75 thousand
Under the new framework, MDR on eligible P2M transactions of ₹75,000 and above will be limited to a maximum of ₹300 per transaction. That is, 0.4 percent on ₹75,000 is calculated as ₹300 and even on amounts above this, the maximum limit of normal MDR will be ₹300.
For example, 0.4 per cent on eligible UPI merchant payments of ₹1 lakh is calculated at ₹400, but the MDR will be limited to ₹300 due to the applicable cap.
Will the MDR money go to the government?
It is not correct to consider MDR as any customer fee paid directly to the government. It is connected to the merchant-payment ecosystem of UPI There is a fee, which involves the bank, payment aggregator and other related entities. The new framework aims to integrate the fee mechanism into UPI's payment structure for large merchant transactions.
Passing the charge on the customer will be a different matter
Most importantly, MDR is a merchant-side fee. Adding a separate 'UPI charge' to the customer's bill does not amount to shifting the MDR to the customer and the new framework does not provide for charging the customer a separate UPI transaction fee.
Therefore, the most important thing for the customers is that on 15th October Using UPI is not going to stop or become expensive. The change primarily relates to the fee structure for eligible large P2M transactions.
Understand the new UPI rules at a glance
- P2P Payment: Free
- Eligible P2M payments up to ₹2,000: no mdr
- Eligible P2M payments above ₹2,000: 0.4% MDR
- ₹75,000 and above: Maximum ₹300 MDR
- Who will give MDR: eligible merchant
- UPI fees vary by customer: No
- Date of entry into force: 15 October 2026
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