New Delhi: UPI users are set to see a new merchant transaction pricing structure from October 15, 2026, with charges ranging from Rs 5 to Rs 300 on certain transactions.
However, the revised system will not mean that users have to pay a charge every time they make a UPI payment. Most small transactions will continue to remain free, while specific categories of merchant payments will attract charges under the new framework.
Small Merchants to Remain Exempt Up to Rs 1 Lakh
Small merchants receiving up to Rs 1 lakh in UPI payments per month will not be charged an additional fee under the new arrangement.
The framework is aimed at protecting small businesses and ensuring that digital payments remain accessible for low-value transactions.
UPI payments of up to Rs 2,000 in most categories will also remain outside the new charge structure.
Rs 5 Charge for Select Essential Services
For certain categories, including railways, telecommunications, insurance, fuel and agricultural inputs, UPI merchant payments above Rs 2,000 will attract a flat Rs 5 MDR.
The government said the lower charge for these categories is intended to prevent digital payment costs from increasing for essential and low-margin businesses.
These categories account for a significant share of UPI person-to-merchant transactions by both volume and value.
Larger Merchant Payments to Attract MDR
For other eligible merchant transactions, payments above Rs 2,000 will attract an MDR of 0.4 per cent.
However, the charge will be capped at Rs 300 per transaction for payments exceeding Rs 75,000.
This means the maximum MDR under this category will be Rs 300, irrespective of how much higher the eligible transaction amount is.
Capital Market Payments to Have Separate Rate
Payments involving mutual funds, securities, stockbrokers and dealers will fall under a separate pricing category.
These transactions will attract an MDR of 0.02 per cent, subject to a maximum charge of Rs 300 per transaction.
Ordinary UPI Users to Continue With Free Payments
The government has clarified that ordinary consumers will continue to be able to use UPI without an additional payment burden under the revised structure.
UPI apps will not be permitted to impose separate platform fees or hidden charges on users. Banks have also been advised that the MDR burden should not be passed on to customers.
There will be no monthly quota, transaction-volume limit or slab for free UPI payments for ordinary users.
Daily Limits Are for Security, Not Charges
The government said daily UPI transaction limits imposed by banks and NPCI will range from Rs 1 lakh to Rs 5 lakh, depending on the category.
These limits are intended for security and risk-control purposes and are not a mechanism for collecting charges from users.
NPCI Says Most Small Transactions Will Remain Unaffected
The National Payments Corporation of India (NPCI) has said the revised MDR framework will have no impact on around 95 per cent of small UPI transactions.
A separate fund has also been proposed to promote digital payments among small merchants and in smaller markets.
NPCI has maintained that even after the introduction of the new MDR structure, UPI payments are expected to remain cheaper than several other digital payment methods, including debit and credit cards and wallets.
Will Merchants Pass the Cost to Customers?
Whether businesses will pass the additional MDR cost on to customers remains an important question.
The government and NPCI have advised merchants not to transfer the MDR burden to consumers, but the extent to which this will be followed will depend on individual businesses and payment arrangements.
The revised framework is scheduled to come into effect from October 15, 2026.
