The National Payments Corporation of India has announced a Merchant Discount Rate (MDR) framework for select UPI transactions that will take effect on October 15, 2026. The move ends six years of zero-charge UPI payments.

Under the framework, a 0.4% MDR will apply to person-to-merchant (P2M) UPI transactions above Rs 2,000, capped at Rs 300 for transactions of Rs 75,000 and above. Fuel and utility payments will carry a flat Rs 5 charge, according to reports.

Merchants receiving up to Rs 1 lakh a month through UPI are exempt from the charge. Person-to-person UPI transfers remain completely free. The NPCI has said around 96% of UPI transactions will remain unaffected by the levy.

Finance Minister Nirmala Sitharaman has clarified that the charge is not a tax, noting that consumers will never be charged for using UPI. The MDR is imposed within the merchant-side payment ecosystem.

The levy has drawn concern from small retailers, with trade bodies warning of margin pressure on high-value, thin-margin sales. The framework is part of a broader effort to make digital payments financially sustainable for banks and payment providers.