India’s UPI payment system is set for a major change from October 15, 2026, with a new Merchant Discount Rate (MDR) applying to certain high-value payments made to merchants. However, the change does not mean consumers will suddenly be charged for using UPI.
The new framework introduces an MDR of up to 0.4% on eligible person-to-merchant (P2M) transactions above ₹2,000, while person-to-person payments will continue to remain free.
Will Consumers Pay a UPI Fee?
No. Consumers will continue to make UPI payments without a transaction charge. The MDR is a merchant-side processing fee and is not supposed to be added to the customer’s bill.
Person-to-person transfers, including sending money to family or friends, will remain free regardless of the amount involved.
UPI payments to merchants of ₹2,000 or less will also remain free.
What Happens to Payments Above ₹2,000?
For eligible merchant transactions above ₹2,000, the standard MDR will be 0.4%, with a maximum cap of ₹300 per transaction.
For example, a ₹3,000 payment would result in ₹12 of MDR, while a ₹50,000 payment would attract ₹200. For a ₹1 lakh transaction, the normal 0.4% calculation would be ₹400, but the ₹300 cap would apply.
The new framework is expected to leave around 96% of P2M transactions unaffected, according to the FAQ.
Small Vendors Will Remain Exempt
Small merchants operating under the P2PM framework will continue to benefit from zero MDR. This category covers eligible small vendors receiving up to ₹1 lakh a month through UPI QR payments
