Overview
- The UPI steering committee and NPCI announced on Tuesday that a 0.4% merchant discount rate will apply to person‑to‑merchant UPI transactions above Rs 2,000, with the rules taking effect on October 15, 2026.
- The framework caps fees at Rs 300 for very large payments, charges a flat Rs 5 for railways, telecom, insurance, fuel and similar sectors, and applies a 0.02% rate for capital‑market payments.
- All person‑to‑person transfers, UPI and RuPay debit payments up to Rs 2,000, and small merchants in the P2PM category (receipts up to Rs 1 lakh a month) are explicitly exempted from any charge.
- Authorities say merchants formally bear the MDR and have ordered banks and UPI app providers not to pass fees to customers or levy platform charges while collections will be shared across banks, apps and NPCI and 5% of revenue will seed a small‑merchants fund.
- Officials justify the change by pointing to rising UPI operating costs estimated at about Rs 20,000 crore a year and data showing only roughly 4% of merchant transactions by count exceed Rs 2,000 but account for a large share of value, a pattern that industry forecasts say could yield large annual revenue pools if realised.