The long-debated merchant fee on UPI payments takes effect on October 15. A merchant discount rate (MDR) of 0.4% will apply to specified person-to-merchant transactions above ₹2,000 — but the charge falls on merchants, not customers.

The fine print protects small businesses and everyday users. Person-to-person transfers remain completely free, and small merchants with monthly volumes up to ₹1 lakh will pay zero MDR. The fee applies only to larger merchants on higher-value transactions, where the cost of the payments infrastructure is highest.

The Supreme Court recently declined to grant an interim stay on the levy, clearing the way for its rollout. The government argues that a sustainable revenue model is needed to keep UPI’s infrastructure world-class as transaction volumes explode.

In a separate change also effective October 1, opening a new National Pension System account now costs ₹200 per PRAN when done through a Point of Presence. The fee covers the onboarding paperwork — a small price, officials say, for a pension account that will run for decades.