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The Ministry of Finance’s 15 September 2026 announcement says the UPI MDR framework was introduced under the Payment and Settlement Systems Act, 2007, after deliberations by the UPI Steering Committee. It does not, by itself, identify one authority responsible for every implementation and enforcement function. The small-merchant support described in official sources is a time-limited FY 2024–25 incentive scheme—not an established ongoing fund paying merchants directly.
Who decides and enforces UPI MDR caps?
The Ministry of Finance’s September 2026 explanation attributes the framework to the Payment and Settlement Systems Act, 2007, and deliberations by the UPI Steering Committee. That establishes the announcement’s stated statutory and institutional basis, but not a complete enforcement chain. The release does not specify the operative legal instrument, which body handles each implementation or supervisory task, or the route for complaints and appeals. Source: Ministry of Finance PIB release, 15 September 2026.
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In other words, the release does not support naming a single official or institution as having exclusive responsibility for ultimate implementation and enforcement. Operational roles may involve payment-system participants, but the announcement alone does not set out their respective legal duties or the process for enforcement action. Specific claims about sanctions, appeals, or who receives a complaint require the relevant operative notification or official procedural guidance.
What does the September 2026 announcement say about MDR?
The release describes a framework with zero-MDR categories and rates for specified transactions; “MDR cap” should not be read as one universal ceiling applying to every UPI payment. Its figures are policy-announcement claims and should be checked against the operative notification before being treated as binding legal terms.
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| Transaction category described in the release | Announced MDR treatment |
|---|---|
| P2P UPI transactions | Free |
| P2M transactions up to ₹2,000 | Free |
| Qualifying small merchants, including street vendors, receiving up to ₹1 lakh per month through UPI QR codes under P2PM | Zero MDR |
| Specified P2M transactions above ₹2,000 | 0.4%, capped at ₹300 for transactions of ₹75,000 and above |
| Above-₹2,000 transactions in named essential sectors | Flat ₹5 |
| Capital-market transactions | 0.02%, capped at ₹300 |
These terms apply only to the categories and qualifications stated in the September 2026 release. It says MDR is distributed among payment ecosystem participants and is “neither a tax nor a charge collected by the Government or NPCI.” That describes how the release characterizes MDR flows; it does not establish that government bodies or NPCI have no regulatory or implementation role. Ministry of Finance PIB release, 15 September 2026.
Is there a dedicated fund for small merchants?
The official sources identify a Cabinet-approved incentive for FY 2024–25, with an estimated outlay of ₹1,500 crore. It covered qualifying BHIM-UPI person-to-merchant transactions up to ₹2,000 for small merchants and offered a 0.15% incentive. The scheme period was 1 April 2024 to 31 March 2025; these sources do not establish a successor or an ongoing dedicated fund as of October 2026. Union Cabinet announcement.
The incentive was not described as a direct grant paid to each merchant. The Ministry’s March 2025 account says government reimbursement went to acquiring banks, which shared amounts with issuer banks, payment service provider banks, and app providers. Of admitted acquiring-bank claims, the announced arrangement provided 80% as unconditional quarterly disbursement; the remaining 20% was performance-linked: 10% for a technical decline rate below 0.75% and 10% for system uptime above 99.5%. Ministry of Finance explanation, March 2025.
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Under the scheme announcement, qualifying small-merchant transactions up to ₹2,000 earned the 0.15% incentive. Transactions above ₹2,000 and transactions by large merchants had zero MDR but no incentive under that scheme. Zero MDR and eligibility for an incentive were therefore separate matters. Union Cabinet announcement.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How is PM Vishwakarma different?
PM Vishwakarma is a separate Central Sector Scheme for artisans and craftspeople in 18 traditional trades, not a general MDR-support fund for all small merchants. Its scheme page lists an incentive of ₹1 per digital transaction, up to 100 transactions monthly, for eligible beneficiaries. It describes implementation involving authorities responsible for MSME, skill development, and financial services. PM Vishwakarma scheme page.
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