From October 15, 2026, some UPI merchant payments will carry a Merchant Discount Rate for the first time since the government waived it in 2020. Here is what changes and what does not.

Person-to-person transfers stay completely free, whatever the amount. Merchant payments up to Rs 2,000 also remain free. Small merchants receiving up to Rs 1 lakh a month through UPI QR codes continue with zero MDR, according to the framework.

The 0.4 per cent charge applies only to person-to-merchant transactions above Rs 2,000. It is capped at Rs 300 per transaction for payments of Rs 75,000 and above. Certain sectors get special rates: a flat Rs 5 for railways, telecom, fuel and some utilities, and 0.02 per cent for capital-market transactions.

The government says about 96 per cent of merchant UPI transactions will remain unaffected. The Finance Ministry has instructed banks and payment apps that no platform fee or convenience charge can be passed on to consumers.

NPCI says the fee will fund cybersecurity, fraud prevention and a small-merchant support fund as UPI volumes cross 24 billion transactions a month.