Overview
- The government and NPCI finalised a 0.4% merchant discount rate for person‑to‑merchant UPI payments above ₹2,000, capped at ₹300 for transactions of ₹75,000 or more, with rollout set for October 15, 2026.
- Officials have denied any foreign pressure in the decision and say merchants must absorb the charge because passing it directly to customers is illegal; GST will apply to the MDR but businesses can claim input tax credit.
- Authorities estimate about 96% of merchant UPI transactions by volume will remain unaffected and the new rules protect small merchants who qualify for the zero‑MDR P2PM framework.
- Opposition parties call the levy a new tax and industry voices warn merchants may recover costs indirectly through higher prices, reduced discounts or refusing UPI for large payments, with some petrol dealers threatening to stop accepting UPI above ₹2,000.
- The change responds to long‑running sustainability and security costs for the hugely scaled UPI system and is intended to create a revenue stream for infrastructure and to help smaller fintech entrants while regulators monitor rollout and compliance.