UPI Charges From October 15, 2026: NPCI Introduces 0.4% MDR Above ₹2,000, ₹300 Cap and ₹5 Flat Rate for Fuel, Insurance, Telecom and Railways

The National Payments Corporation of India (NPCI) has introduced a revised Merchant Discount Rate (MDR) framework for select UPI Person-to-Merchant (P2M) transactions, with the new structure scheduled to take effect from October 15, 2026. The revised framework introduces MDR on certain higher-value merchant transactions while keeping UPI payments free for consumers.

NPCI said the revised framework is aimed at establishing a sustainable commercial model for the UPI ecosystem. Revenue generated through MDR is expected to support investments in payment infrastructure, cybersecurity, resilience, innovation and customer services.

UPI Payments Up to ₹2,000 Remain Free

Under the revised framework, Person-to-Person (P2P) transactions and P2M transactions up to ₹2,000 will remain outside the scope of MDR. NPCI said these small-value transactions account for more than 95% of total UPI P2M transactions.

Consumers will continue to make UPI payments without transaction charges. The revised MDR structure is focused on selected merchant-side transactions and does not introduce a payment fee for individuals using UPI for everyday purchases or money transfers.

0.4% MDR on P2M Transactions Above ₹2,000

For standard Person-to-Merchant UPI transactions above ₹2,000, an MDR of 0.4% of the transaction value will apply under the revised framework. The charge is applicable to eligible merchant transactions and is intended to provide a commercial revenue stream for participants in the UPI ecosystem.

For transactions of ₹75,000 and above, the MDR will be capped at ₹300 per transaction. Therefore, a ₹3,000 transaction would attract an MDR of ₹12, while a ₹50,000 transaction would attract ₹200. For a transaction of ₹1 lakh, the 0.4% calculation would amount to ₹400, but the applicable charge would be restricted to the ₹300 maximum cap.

₹5 Flat MDR for Select Sectors

NPCI has prescribed a separate flat-rate MDR for specified merchant categories. UPI payments above ₹2,000 involving sectors such as railways, telecom services, insurance and fuel will attract a flat MDR of ₹5 per transaction, instead of the standard 0.4% rate.

The flat-rate structure is intended to prevent the MDR from increasing proportionately with the value of transactions in sectors where large payments are common. Fuel payments below ₹2,000 will continue to remain outside the MDR framework.

Insurance Premium Payments

Insurance premium payments exceeding ₹2,000 will qualify for the special ₹5 flat MDR structure under the designated industry programme. This means eligible high-value insurance premium payments will not be subjected to the standard 0.4% percentage-based MDR.

NPCI said the concessional structure is intended to keep digital insurance collections cost-efficient, particularly for policyholders making high-value annual or semi-annual premium payments.

Utility Bill Payments

Certain public utility payments will also receive special treatment under the revised framework. Electricity distribution charges, municipal water charges and piped natural gas payments are included under the designated industry programme category.

For eligible utility payments above ₹2,000, the applicable MDR will be a flat ₹5 per transaction, rather than the standard 0.4% rate. Utility payments below ₹2,000 will remain free of MDR.

Educational Fee Payments

Educational fee collections, including school tuition, university fees and institutional examination fees, are also covered under the designated industry programme category. Transactions up to ₹2,000 will continue to remain free of MDR.

For higher-value educational payments, the framework provides for flat-fee structures or capped processing rates rather than imposing a high percentage-based charge on large fee payments.

Small Merchants to Continue With Zero MDR

NPCI has retained zero MDR for eligible small merchants operating under the Person-to-Person Merchant (P2PM) framework. The P2PM category is designed to support small vendors receiving UPI QR payments directly into their bank accounts.

Small merchants receiving up to ₹1 lakh per month through eligible UPI QR transactions can continue to benefit from zero MDR. The framework is intended to promote digital payment acceptance among micro-businesses and the unorganised retail sector.

Existing QR Codes Will Continue to Work

Small merchants will not be required to replace or re-register their existing UPI QR codes because of the revised MDR framework. Existing physical QR stands and soundboxes can continue to be used, allowing eligible merchants to accept payments without interruption.

NPCI has also stated that GST registration is not required for a small merchant to qualify for zero-MDR protection under the P2PM category. Eligibility is determined by applicable transaction thresholds and merchant account categorisation.

Dedicated Fund for Small Merchants

The revised framework proposes a dedicated fund for small merchants to support the expansion of digital payment infrastructure. The fund will focus on existing merchants as well as smaller markets, including Tier 3 to Tier 6 centres.

The proposed support will cover areas including the Northeast, Jammu and Kashmir and Ladakh, along with Tier 1 and Tier 2 centres. The fund is expected to provide financial assistance for merchant onboarding and incentives for UPI transactions originating from small merchants, particularly in rural and underserved areas.

NPCI said the detailed operational framework for the dedicated fund will be finalised in consultation with the Reserve Bank of India (RBI) within the next three months.

Capital Market Transactions

A separate MDR structure has been introduced for certain capital market transactions conducted through UPI. Payments relating to mutual funds, securities, stockbrokers and dealers will attract a nominal MDR of 0.02% of the transaction value, subject to a maximum cap of ₹300 per transaction.

The framework covers regulated entities such as asset management companies, SEBI-registered stockbrokers, securities dealers and investment platforms. It applies to specified transactions including mutual fund purchases, equity-related payments, debt-market investments and broker wallet top-ups.

Credit-Linked UPI Payments

The revised MDR framework specifically applies to direct user-account-to-merchant-account UPI transactions. Credit-linked UPI payments, including RuPay credit cards linked to UPI and pre-sanctioned bank credit lines, will continue to operate under separate credit-product rules.

This distinction means the MDR provisions described in the revised framework do not automatically apply to transactions funded through credit-linked UPI instruments.

Consumers Will Not Be Charged

NPCI has clarified that consumers will continue to use UPI without transaction charges. Person-to-Person transfers will remain free for both the sender and recipient, while consumers making QR-code payments at local shops and vendors will not be charged an additional transaction fee.

The framework also states that enterprise merchants cannot pass the MDR directly to customers by adding a separate charge for UPI payments. Consumers are expected to continue paying the listed price for goods and services.

No Monthly Cap on Free UPI Transactions

The revised MDR framework does not introduce a monthly quota, volume limit or tiered cap on free UPI transactions for individual consumers. Users can continue making valid P2P and eligible P2M transactions without transaction fees.

Existing daily transaction limits imposed by banks and NPCI for security and risk-management purposes will continue to apply separately. These limits should not be confused with MDR or consumer transaction charges.

Recurring UPI Payments

Automated recurring payments through UPI Mandates or UPI AutoPay will not attract the prescribed MDR under the framework for specified recurring transactions. This includes recurring payments such as utility bills, OTT subscriptions and recurring investments covered by the applicable rules.

The provision is intended to ensure that consumers using UPI for recurring financial commitments do not face a new MDR-related charge on such automated payments.

Why NPCI Is Introducing MDR

NPCI said the introduction of MDR is linked to the growing scale of the UPI ecosystem. The payment system requires continued investment in server infrastructure, telecommunications, fraud prevention, cybersecurity, technical support and system resilience.

According to figures cited in the NPCI FAQ document, UPI processed 2,451 crore transactions worth ₹29.9 lakh crore in August 2026. NPCI said the scale of operations makes a sustainable funding model important for maintaining and expanding the digital payments infrastructure.

The revised commercial structure is also expected to support greater competition among fintech companies and payment-app operators by creating a more predictable revenue model. NPCI said this could help smaller technology companies compete, while additional ecosystem revenue can support payment reliability, cybersecurity and innovation.

Revised Framework Takes Effect October 15

The finalized UPI MDR framework and threshold structure will take effect from October 15, 2026. Banks, payment aggregators, fintech companies and corporate accounting platforms will have time before implementation to update their software, payment systems and billing processes.

The revised structure therefore introduces charges only for selected merchant-side, higher-value UPI transactions while retaining zero-cost UPI payments for consumers, P2P transfers, transactions up to ₹2,000 and eligible small merchants.