UPI Payments to See a New MDR Rule From October 15

For many years UPI payments in India have been simple. Users scan a QR code, enter their PIN and pay without any extra charge. But from October 15, 2026, a new Merchant Discount Rate (MDR) will apply to some UPI payments made to businesses. Under the new rule a 0.4% MDR will apply to certain person-to-merchant UPI payments above 2,000. The charge will be paid by the merchant as part of the digital payment process not by the customer. For example, if a customer pays 3,000, the MDR would be 12. For a 50,000 payment, it would be 200. If the payment is 1 lakh, 0.4% would normally be 400, but the charge will be capped at 300 for transactions of 75,000 and above.

The important thing to remember is that customers will not have to pay this MDR separately. If something costs 5,000, the customer should only pay 5,000 through UPI. A merchant should not add another extra 20 to the bill just because the customer is paying by UPI. Person-to-person (P2P), UPI transactions remain free. Sending money to family, paying a friend back, splitting a restaurant bill or transferring money between your own bank accounts will remain free. Small merchants who meet the specified monthly UPI receipt threshold will also remain protected from the new MDR.

In simple terms, the new MDR is a charge on certain merchant transactions, not a new fee for ordinary UPI users. Customers can continue using UPI without paying an extra transaction charge.

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