The financial landscape of India's digital payments ecosystem is set for a notable shift. The Centre has announced the introduction of a Merchant Discount Rate (MDR) on specific Unified Payments Interface (UPI) transactions, altering the cost structure for commercial digital exchanges.
According to reports, UPI payments made to merchants that exceed ₹2,000 will attract a 0.4% MDR, starting from 15 October 2026.
Structure of the New Merchant Fees
Under the newly outlined guidelines, the application of the merchant fee is carefully demarcated by transaction type and value.
- Threshold: The 0.4% MDR applies specifically to person-to-merchant (P2M) transactions exceeding ₹2,000.
- P2P Exemption: Regular person-to-person (P2P) UPI transactions will continue to remain entirely free of charge for users.
- Transaction Cap: For larger financial exchanges, the MDR is capped at ₹300, which applies to transactions valued at ₹75,000 and above.
This tiered implementation seeks to balance commercial viability for payment service providers while protecting everyday peer transfers from added costs.
Implications for Businesses and Platforms
The policy update marks a critical regulatory update for merchants across the country. While small-ticket purchases below the ₹2,000 threshold remain untouched by the new merchant fee, high-value commercial transactions will now factor in the 0.4% charge.
Business owners and digital service platforms are currently reviewing the operational adjustments required ahead of the mid-October rollout. Industry stakeholders point out that the ₹300 ceiling provides a predictable boundary for high-value B2B or large retail settlements processed via UPI.