UPI payments above ₹2,000 will attract MDR from October 15, 2026, but customers will not be charged directly. Know the new rules and impact
New Delhi: UPI, which has become India’s largest digital payment platform, is set to see a major change. The National Payments Corporation of India (NPCI) has decided to introduce a Merchant Discount Rate (MDR) on certain UPI merchant transactions above ₹2,000. The new system will come into effect from October 15, 2026. However, customers will not bear the direct cost of this change. In other words, regular UPI users will not have to pay an additional charge while making payments.
How Much Will Be Charged on UPI Payments Above ₹2,000?
Under the new system, a 0.4% MDR will apply to Person-to-Merchant (P2M) UPI transactions above ₹2,000. The charge will apply on the merchant side of the payment system. For transactions of ₹75,000 or more, the maximum MDR will be capped at ₹300. This means that even for high-value transactions, the MDR cannot exceed the prescribed limit.
For example, if a customer makes a UPI payment of ₹10,000 to a merchant, the MDR at 0.4% would amount to ₹40. This amount will not be added separately to the customer’s UPI payment. The new system aims to address costs associated with the payment ecosystem and create a sustainable fee structure for digital payment infrastructure.
Flat ₹5 MDR for Certain Sectors
NPCI has introduced a separate arrangement for certain categories. In sectors such as railways, telecom, insurance and fuel, a flat MDR of ₹5 will apply to eligible UPI payments above ₹2,000. Payments related to taxes, utilities and some other categories may also come under the new MDR framework.
However, this does not mean that customers will have to pay ₹5 on every UPI payment above ₹2,000. MDR is a merchant-side charge. The government and payment companies have also clarified that the charge will not be directly recovered from customers.
What Happens to Payments Up to ₹2,000?
No MDR will apply to P2M UPI transactions of up to ₹2,000. This means the new MDR system will not affect small UPI payments commonly made at small shops and for everyday purchases.
Person-to-Person (P2P) UPI transactions will also remain free. If you send money to a friend, family member or another individual’s bank account through UPI, no new charge will apply to that transaction because of the MDR changes.
What Will Happen to SIPs, Insurance and OTT AutoPay?
The new MDR framework has also raised questions among people who use UPI AutoPay to make mutual fund SIP payments, insurance premium payments, subscriptions or OTT payments.
The key point is that not every automatic UPI payment will attract the same charge. The applicability of MDR will depend on the nature of the transaction, the amount involved and the merchant category. Therefore, simply using UPI AutoPay will not automatically result in an additional charge for customers.
However, companies and merchants may need to reassess their payment-related costs. Whether this eventually affects the prices of different services, payment options or offers will depend on the decisions taken by individual companies.
What Will Change for UPI Users?
For regular customers, the key point is that UPI money transfers will continue as usual. Person-to-person (P2P) transactions will remain outside the new MDR framework.
Person-to-merchant (P2M) payments of up to ₹2,000 will also remain outside the MDR. For merchant payments above ₹2,000, the applicable charge will be calculated on the merchant side of the payment system. Customers will not be directly charged for it.
The change is significant for payment companies, banks and merchants as UPI usage continues to grow rapidly in India. In August 2026, UPI processed around 24 billion transactions with a total value of approximately $311 billion. The new MDR framework comes at a time when UPI has become a major part of India’s digital payment ecosystem.
Overall, the new MDR framework will take effect from October 15. However, it does not mean customers will pay an additional charge on every UPI payment above ₹2,000. For now, the direct financial impact will be on merchants, while small UPI payments and person-to-person transactions will continue to remain free.
