MDR on UPI: How are charges calculated per transaction?
The National Payments Corporation of India has introduced a 0.4% Merchant Discount Rate on UPI transactions exceeding ₹2,000, effective October 2026. Small-value transactions and person-to-person transfers remain free of charge.
Why it matters
This policy change impacts digital payment costs for merchants and clarifies the fee structure for the widely used UPI platform in India.
The National Payments Corporation of India (NCPI) has introduced a Merchant Discount Rate (MDR) of 0.4% that merchants will have to pay to banks and payment processors on UPI transactions over ₹2,000. The NCPI circular, issued on September 15, 2026, stipulated that the new charge would be applicable only for person-to-merchant UPI transactions and will have no impact on small-value UPI transactions up to ₹2,000.
The circular also stated that small merchants receiving up to ₹1 lakh per month via UPI QR codes, under the Person-to-Person Merchant (P2PM) classification, will not have to pay MDR on any UPI transactions that they receive. However, transactions pertaining to certain essential sectors, such as railways, telecom and fuel, will attract a flat MDR of ₹5 per transaction for payments above ₹2,000 rather than a percentage. For transactions of ₹75,000 and above, MDR will be capped at ₹300 per transaction.
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