The UPI and Services Steering Committee on Tuesday decided to implement the Merchant Discount Rate (MDR) on select person-to-merchant (P2M) UPI transactions immediately after Diwali, according to a statement by NPCI on X.
National Payments Corporation of India (NPCI)'s decision takes into account the festive season, with the implementation date to be notified separately, the statement said.
MDR is a fee charged to merchants for processing digital payments. The proposed move will apply only to select merchant transactions, though the statement did not specify which categories of transactions would attract the charge.
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Under the new framework, merchants accepting UPI payments above ₹2,000 would have to pay a fee of 0.4% of the transaction value. However, person-to-person transfers will be exempted from the charge, and payments to certain categories will attract a flat ₹5 fee irrespective of the amount.
The MDR framework came after the Parliament cleared the Taxation and Other Laws (Amendment) Bill, 2026 on August 11, amending Section 10A of the Payment and Settlement Systems Act, 2007, to give the government the power to permit charges on specified digital payment modes.
{{/usCountry}}The MDR framework came after the Parliament cleared the Taxation and Other Laws (Amendment) Bill, 2026 on August 11, amending Section 10A of the Payment and Settlement Systems Act, 2007, to give the government the power to permit charges on specified digital payment modes.
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Based on this, two types of fees will apply to UPI payments above ₹2,000. The first is a flat MDR of ₹5 per transaction on payments to merchants in four specified categories — railways, telecom services, insurance and fuel.
The second constitutes an MDR of 0.4% on other person-to-merchant (P2M) UPI payments above ₹2,000, capped at ₹300 per transaction.