From October 15, 2026, specified UPI merchant payments above Rs 2,000 will carry a 0.4 per cent Merchant Discount Rate. Here is what the new framework means for you.

The charge applies only to person-to-merchant transactions above Rs 2,000. It will be paid by the merchant, not the customer. Finance Minister Nirmala Sitharaman clarified this on September 25, rejecting claims that it is a tax on consumers.

The MDR is capped at Rs 300 per transaction. Person-to-person transfers and all payments up to Rs 2,000 remain completely free. Sectors with thin margins, such as fuel, telecom, insurance, railways and farm inputs, will pay a flat Rs 5 per transaction above Rs 2,000.

Of the amount collected, 40 per cent goes to the customer’s bank, 30 per cent to payment gateways, 20 per cent to the UPI app and 10 per cent to the sponsoring bank. The government says it will not receive any of it.

Trader bodies had called for a ‘No UPI Day’ protest on October 2, but withdrew it after a delegation led by MP Praveen Khandelwal met the minister. The NPCI has also denied reports that GST would apply on the MDR.