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A new Merchant Discount Rate (MDR) for some UPI merchant payments is scheduled to take effect on 15 October 2026. The reported standard rate is 0.4% on eligible person-to-merchant transactions above ₹2,000, capped at ₹300 for transactions of ₹75,000 or more. The fee is intended for merchants, not consumers. The forecast that it is unlikely to materially reduce UPI transaction volumes came from NPCI chief executive Dilip Asbe—not RBI Governor Sanjay Malhotra. Because the start date is still ahead as of 7 October 2026, the fee’s actual effects are not yet known.
What is changing on 15 October?
MDR, or Merchant Discount Rate, is a fee associated with processing a merchant payment. The framework details reported by The Indian Express say a 0.4% MDR is scheduled to apply from 15 October 2026 to specified UPI person-to-merchant (P2M) transactions above ₹2,000. For transactions of ₹75,000 or more, the reported fee is capped at ₹300.
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The Ministry of Finance has said UPI consumers will not face transaction charges and that person-to-person (P2P) transfers remain free. It describes any MDR as limited to selected merchant transactions. The precise operating rules for all merchant categories and exemptions depend on detailed implementation guidance; the reported framework alone does not establish every category’s treatment.
Which payments are covered?
| Payment or merchant case | What the announced framework indicates |
|---|---|
| UPI payment from one individual to another (P2P) | Remains free, according to the Ministry of Finance. |
| Eligible UPI payment to a merchant of ₹2,000 or less | Outside the reported standard MDR threshold, which applies above ₹2,000. |
| Specified UPI payment to a merchant above ₹2,000 | Reported standard MDR is 0.4%, subject to the cap and applicable category rules. |
| Transaction of ₹75,000 or more | Reported MDR cap is ₹300. |
| Special merchant categories or small merchants | Special treatment and small-merchant rules are discussed in reporting, but the full category-by-category operating rules are not established by the available official statement. |
The threshold should not be read as meaning that every merchant payment above ₹2,000 will necessarily incur the same fee: the reporting describes specified transactions and notes special categories and small-merchant rules. The Ministry has also said banks should ensure merchants do not pass MDR on to customers. A hypothetical consumer pass-through is therefore different from the stated policy direction.
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Will UPI payments be charged to customers?
The Ministry’s stated position is that consumers will not face UPI transaction charges. MDR is described as a merchant-side fee on selected P2M transactions, not a charge debited from a customer simply for paying by UPI. The Ministry has said banks should ensure merchants do not transfer the MDR to customers.
That distinction matters when assessing claims about consumer costs: the announced policy treatment and a possible merchant decision to raise prices are not the same thing. The available information does not establish that consumers may be charged a separate UPI fee under this framework.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Did the RBI Governor say the fee would not affect volumes?
No. The expectation that the MDR is unlikely to materially affect UPI transaction volumes was attributed by Mint to Dilip Asbe, managing director and chief executive of the National Payments Corporation of India (NPCI). RBI Governor Sanjay Malhotra was separately reported by Business Standard discussing the costs of maintaining digital-payment infrastructure. Those are different remarks, and the volume forecast should not be attributed to the Governor.
Asbe’s view is a forecast, not a measured result. A contrasting LocalCircles estimate, reported by Business Standard, projected a possible 4% monthly decline in UPI transaction volume and a 10% decline in transaction value if merchants passed MDR on to consumers. That is a conditional, survey-based projection—not evidence that either decline has happened or a consensus forecast.
What can be known about UPI volumes so far?
The scheduled start date has not arrived as of 7 October 2026, so there are no post-launch figures establishing whether payment volumes or values changed because of MDR. The Ministry of Finance reported 2,366 crore UPI transactions worth ₹29.9 lakh crore in July 2026. That is a pre-effective-date snapshot, not evidence of the new fee’s impact.
The policy debate is about the sustainability of digital-payment infrastructure as well as possible responses by merchants and users. The Ministry has framed the measure as supporting long-term sustainability, technological advancement and resilience. Whether the reported fee changes merchant or customer behavior can only be assessed after implementation and with subsequent data.
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