In graphs | Why private banks and foreign UPI apps stand to gain from the MDR charge
The National Payments Corporation of India has introduced a 0.4% Merchant Discount Rate on UPI transactions of ₹2,000 or more for mid and large merchants starting October 2026. This policy change is expected to generate significant revenue while exempting small vendors and P2P transfers.
Why it matters
The shift impacts the digital payment ecosystem in India, potentially altering the revenue models for private banks and major fintech apps.
The new Merchant Discount Rate (MDR) on UPI will affect a tiny proportion of UPI users, and will benefit a small number of banks — predominantly private ones like Yes Bank — and a few UPI apps such as Walmart-owned PhonePe, and Google Pay, data from the National Payments Corporation of India (NPCI) shows.
The NPCI has said that, starting October 15, 2026, an MDR of 0.4% will be charged on UPI payments of ₹2,000 or more made to mid and large merchants. This will mean that only about 2.5% of UPI transactions by volume will face the charge.
All Person-to-Person (P2P) transactions will remain free of charge, regardless of the amount being transferred. Further, payments to merchants up to ₹2,000 will remain free of MDR.
Get smarter about the news
Sign up free for a feed built around what you actually care about, Dive Deeper research on any story, and the full text of every article.
Create free accountAlready have an account? Sign in