Centre rolls out new MDR system for large UPI transactions
No fee on UPI transactions up to Rs 2,000 or payments through RuPay debit card
MDR up to 0.4% will be levied on transactions above Rs 2,000, it will not affect common consumers
New Delhi, September 15: Under the new system issued by the Central Government on Tuesday for large digital payments, it has been decided to charge ‘Merchant Discount Rate’ (MDR) of 0.4% from merchants on UPI transactions of more than Rs 2,000. However, such charges on UPI payments will not affect common consumers.
In a statement issued on Tuesday, the Finance Ministry said that under the new system, it has been decided to charge MDR of 0.4% from merchants on UPI payments of more than Rs 2,000. The maximum fee for payments of ₹75,000 or more will be ₹300. The new changes will become effective from October 15, 2026.
According to the ministry, this eliminates the zero-MDR system that was in place since January 2020. This system was implemented to promote digital payments, but banks and financial technology (fintech) companies have long questioned it. MDR is the fee charged to merchants for accepting digital payments.
The National Payments Corporation of India (NPCI) stated that essential sectors such as railways, telecommunications, and fuel will have a uniform fee of ₹5 per transaction, while the MDR rate for payments in the capital markets will be 0.02%.
According to NPCI, small merchants with monthly income up to ₹100,000 per month through UPI QR codes will be completely fee-free under the new system. The government states that this provision will not impact 96% of merchant transactions. However, MDR will be levied on UPI payments from an individual to a merchant exceeding ₹2,000, and the maximum fee will be ₹300 for payments of ₹75,000 or more.
However, this change will not affect P2P UPI transactions between individuals. Such transactions account for 37% of total UPI transaction volume and 70% of the value.
Under the National Payments Corporation of India’s new system, payment app providers are prohibited from charging a separate digital platform fee. Banks have been instructed to ensure that merchants do not pass on the MDR cost to customers. A fifth of the proceeds from the new fee will be used to expand UPI among small merchants.
It is noteworthy that the central government has directed banks and payment system providers not to charge any fees on UPI transactions up to ₹2,000 or payments made using RuPay debit cards.
