UPI charges announced for merchants; 0.4% on transactions over Rs 2,000

In a separate statement, the Union Ministry of Finance said banks have been “advised” to ensure merchants do not pass on the cost to customers.

said that a flat merchant fee of Rs 5 will be charged from merchants for payments made in certain industry categories. For example, this will be applicable to companies receiving UPI payments for rail tickets, fuel and agricultural inputs, credit card dues, telecom or utility bills, insurance premiums, and tax payments. This flat-fee model, the finance ministry said, will stop costs from rising in critical public services, utility bill collection, and sectors with thin profit margins.

 

View this post on Instagram

 

A post shared by The Indian Express (@indianexpress)

These ‘industry’ payments account for 17 per cent of UPI P2M transactions in volume terms and 46 per cent in value terms.

The charges announced on Tuesday will be reviewed every 6 months to 1 year and will be shared between banks, payment apps, and payment service providers.

NPCI and the finance ministry said transactions of more than Rs 2,000, on which MDR would be charged to merchants, make up only 4 per cent of all UPI payments to merchants. The balance 96 per cent are UPI transactions less than Rs 2,000 each in ticket size. However, transactions of over Rs 2,000 make up two-thirds of all P2M payments in value terms.

In 2025-26, there were more than 24,000 crore UPI transactions, and their total value was Rs 314 lakh crore.

The RBI backed the introduction of MDR on large-value UPI transactions, saying it will help strengthen the long-term sustainability of India’s digital payments ecosystem. In a post on X, the central bank said it would enable UPI to continue scaling, innovating and serving consumers and businesses across the country.

Regarding Merchant Discount Rate (MDR) on Select UPI (P2M) Transactions

Please refer to the FAQs here: https://t.co/DTOZFVHAVB pic.twitter.com/4HMU0YZ2AC

— NPCI (@NPCI_NPCI) September 15, 2026

It said a fair distribution of MDR among ecosystem participants would support continued investment in technology, infrastructure and payment acceptance networks. Such investments, it said, could help expand UPI acceptance, deepen the customer base and sustain growth in transaction volumes.

To drive higher business volume, merchants absorb nominal digital processing costs, NPCI said, adding these are offset by increased footfall, higher average ticket values, and reduced cash-handling risks. As such, shopkeepers have no reason to inflate retail shelf prices and pass on the costs to the consumer, it said.

Small merchants, who receive up to Rs 1 lakh per month into their bank accounts via UPI QR codes, will continue to face zero MDR, the NPCI said. These small merchants will operate under the Person-to-Person Merchant (P2PM) framework of the NPCI.

“This classification bridges informal street vendor setups and formal commercial merchant acquiring accounts, ensuring zero cost for micro-businesses. It promotes digital payment adoption across the unorganised sector,” the NPCI said.

Merchants who receive more than Rs 1 lakh in their bank account via UPI for three months in a row will be moved to the P2M category.

To promote digital payments, 5 per cent of the entire MDR fee collected will be used to create a dedicated fund. This fund will be used to help small merchants accept UPI payments.

UPI payments towards mutual funds, securities, and stock brokers have been prescribed a lower fee of 0.02 per cent. This is to encourage retail participation in formal financial markets, the NPCI said.

SIP payments made via UPI will not face even this 0.02 per cent fee. Similarly, recurring standing instructions that make payments automatically will not face this charge. These ‘autopay’ categories include monthly utility bills and OTT streaming subscriptions, among others.

The revised MDR framework comes a day after the government notified that banks and service providers can’t impose any charges on UPI payments of under Rs 2,000 and those made by RuPay debit cards.

Industry players have been repeatedly calling for the return of the MDR on UPI to help them meet their infrastructure and transaction settlement costs of around Rs 20,000 crore per year. While lower than 1-3 per cent charge that merchants must pay on debit and credit card payments, the 0.4 per cent fee on UPI payments will provide the money for continuous technological innovation and allow new fintech startups and technology companies to enter the digital payments space and compete with “well-capitalised tech conglomerates”, the NPCI said.

The MDR revenue will also fund investments in cyber security infrastructure, AI-driven fraud detection, and encryption upgrades, it added.

Since January 2020, there has been no MDR on RuPay debit cards and UPI transactions. This was to promote the adoption of digital payments across the country. To help meet some of the costs, the government has been subsidising payments of up to Rs 2,000 made to small merchants through its ‘Incentive scheme for promotion of RuPay Debit Cards and low-value BHIM-UPI transactions (P2M)’. The incentive offered is capped at 0.15 per cent of the transaction value. Large merchants are not covered under this scheme.

The new fees apply only to person-to-merchant (P2M) transactions. Person-to-person (P2P) transactions will continue to be free, irrespective of the size of the transaction. There are no monthly quotas, volume limits, or tiered caps on free UPI transactions for individuals, the Ministry of Finance said in a statement, adding that daily transaction limits of Rs 1 lakh-Rs 5 lakh enforced by banks and NPCI are “purely risk-management measures, not commercial charge tiers”.

“The new MDR framework will make UPI self-sustainable, give incentives for further expansion in rural and semi urban areas and maintain competitiveness, while ensuring that a large majority of payments remain free of charge,” the finance ministry said, adding that UPI app providers cannot levy platform fees or hidden charges.