UPI’s merchant discount rate, or MDR, is a fee merchants pay banks for processing digital payments. It is the cost of accepting a digital payment, and it is not charged to the customer.

Under the proposed framework, an MDR of 0.4 per cent would apply to eligible person-to-merchant UPI transactions above Rs 2,000. A Rs 10,000 payment would attract Rs 40, capped at Rs 300 per transaction.

Different categories carry different rates. Utility payments, loan repayments and capital market transactions have their own structures. Loan autopay mandates and sectors like telecom, education, fuel, railways and insurance would attract a flat Rs 5 fee.

Person-to-person transfers stay free, as do merchant payments up to Rs 2,000. The government says about 96 per cent of merchant UPI transactions will remain unaffected.

The rollout, set for October 15, may move to January 1, 2027. Merchant bodies asked for more time, citing confusion over rates and the festive season rush. NPCI will decide within days.