UPI Transaction Charges Framework
Exemptions and Charges
- All person-to-person UPI transactions and UPI transactions to small vendors are exempt from charges.
- Person-to-merchant transactions below ₹2,000 on UPI or through RuPay debit cards are also exempt.
- The Merchant Discount Rate (MDR) of 0.4% applies to person-to-merchant transactions exceeding ₹2,000.
- Essential sectors like Railways, telecom, insurance, fuel, and agriculture inputs incur a flat MDR of ₹5 for transactions over ₹2,000.
Implementation and Distribution
- The new MDR structure is effective from October 15, 2026.
- Banks are advised not to pass MDR charges to customers for UPI payments.
- The 0.4% MDR is shared among payment ecosystem partners like banks and app providers.
Special Provisions
- For transactions above ₹75,000, MDR is capped at ₹300.
- Small merchants receiving up to ₹1 lakh per month through UPI are exempt from MDR.
Sector-Specific Rates
- Essential sectors have a flat MDR of ₹5 for transactions above ₹2,000.
- Payments towards mutual funds, securities, etc., attract an MDR of 0.02%, capped at ₹300.
Objectives and Impact
- The framework aims to make UPI self-sustainable and enhance its rural and semi-urban expansion.
- Only 4% of merchant transactions are impacted due to most being under the ₹2,000 threshold.
- A fund for promoting UPI use by small merchants will be created with 5% of MDR collections.
This initiative aims to expand UPI acceptance, encourage sustained usage, and integrate small businesses into India's digital payments system.
