New Delhi: The government has ruled out any rollback of the newly announced Merchant Discount Rate (MDR) framework for certain high-value UPI transactions. A senior government official said on Wednesday that there was no question of reversing the decision.
The new framework is scheduled to come into effect from October 15, 2026, and will introduce a 0.4% MDR on specified person-to-merchant (P2M) UPI transactions above ₹2,000.
UPI Charges Will Be Paid by Merchants
Under the new system, the MDR will be applicable to eligible merchant transactions rather than person-to-person payments. The government has clarified that customers will not be charged a separate UPI transaction fee.
The Merchant Discount Rate is a processing charge within the digital payments ecosystem. According to the government, it is not a tax collected by the government or NPCI. The amount is distributed among participants in the payments ecosystem to support infrastructure, security and other operational requirements.
UPI Payments Between Individuals Will Remain Free
The new framework does not affect person-to-person (P2P) UPI transfers. Individuals will continue to be able to send money to friends, family and other individuals without an MDR, irrespective of the transaction amount.
Merchant payments up to ₹2,000 will also remain free under the framework. The government has said that approximately 96% of P2M UPI transactions will remain unaffected by the new rules.
Why Is the MDR Being Introduced?
The government has said that the new framework is intended to support the long-term sustainability of the UPI ecosystem.
UPI handles billions of transactions every month and requires continued investment in infrastructure, cybersecurity, reliability and customer support. The government has argued that the new MDR framework will help create a sustainable financial model for the payments ecosystem.
MDR Capped at ₹300 for Higher-Value Transactions
For eligible UPI merchant transactions of ₹75,000 or more, the MDR will be capped at ₹300 per transaction.
The framework therefore combines a percentage-based charge for eligible transactions above ₹2,000 with a maximum cap for very high-value payments.
Government Rejects Rollback Demand
The government’s clarification came amid criticism of the new UPI MDR framework. Officials have maintained that the decision has already been taken and that there is no plan to reconsider or withdraw it.
The new system is expected to change the cost structure for certain merchants while keeping UPI payments free for consumers in the categories covered by the zero-MDR framework.
What Changes From October 15?
- P2P UPI transfers: Remain free
- Merchant payments up to ₹2,000: Remain free
- Specified merchant payments above ₹2,000: 0.4% MDR
- Transactions of ₹75,000 and above: MDR capped at ₹300
- Consumer UPI transaction fee: No separate fee
- Effective date: October 15, 2026
The new framework is expected to bring a significant change to the economics of high-value merchant payments, while the majority of everyday UPI transactions will continue without MDR.
