NPCI introduces 0.4% MDR charge on UPI payments above ₹2,000, exempts small merchants, person-to-person transfers
The NPCI has introduced a 0.4% Merchant Discount Rate (MDR) on UPI transactions exceeding ₹2,000 for large merchants. Small vendors and person-to-person transfers remain exempt from these charges to encourage digital adoption.
Why it matters
This policy shift impacts the cost structure of digital payments in India, balancing revenue generation for banks with the goal of maintaining UPI's popularity among small businesses.
The National Payments Corporation of India (NPCI) has introduced a Merchant Discount Rate (MDR) charge of 0.4% that large merchants will have to pay banks and payment processors on UPI payments they receive in excess of ₹2,000 per transaction, it said in a circular issued on Tuesday (September 15, 2026).
All person-to-person UPI transactions and UPI transactions to small vendors will be exempt from the charges, as will person-to-merchant transactions of a value less than ₹2,000 per transaction done on UPI or through RuPay debit cards.
“For person-to-person (P2P) transactions, there will be no charges at all, irrespective of transaction value,” the Ministry of Finance said in a release. “P2P transactions constitute 37% of the total UPI transaction in volume terms and 70% in value terms.”
“Charges will apply only to person-to-merchant (P2M) transactions exceeding ₹2,000,” it added.
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