UPI Charges Above ₹2,000: 0.4% MDR, ₹5 Fee for Select Payments

UPI Charges Above ₹2,000: 0.4% MDR Announced, ₹5 Flat Fee for Select Transactions; Consumers Stay Free

The National Payments Corporation of India (NPCI) has announced a revised Merchant Discount Rate (MDR) framework for select UPI transactions above ₹2,000, bringing a major change to India's digital payments ecosystem.

Under the new framework, a 0.4% MDR will apply to eligible Person-to-Merchant (P2M) UPI transactions above ₹2,000, with the charge capped at ₹300 per transaction. The revised framework will come into effect from October 15, 2026.

However, the most important point for ordinary UPI users is that consumers will not have to pay this MDR. The charge is applicable on the merchant side, while Person-to-Person (P2P) UPI transactions will remain free irrespective of the transaction amount.

What Is Changing for UPI Payments Above ₹2,000?

For eligible merchant transactions above ₹2,000, the standard MDR will be 0.4%.

The MDR will have a maximum cap of ₹300 per transaction. This means that once a transaction reaches ₹75,000, the applicable MDR will not increase beyond ₹300.

Importantly, this is a merchant-side charge, not a fee that consumers will have to pay while making UPI payments.

For example, if a customer makes a ₹10,000 eligible merchant payment through UPI, the applicable MDR would be ₹40 under the 0.4% framework, but the customer would still pay ₹10,000 and not ₹10,040.

₹5 Flat MDR for Railways, Fuel, Telecom and Insurance

NPCI has also introduced a special flat-rate structure for selected merchant categories.

UPI payments above ₹2,000 in categories including:

• Railways

• Telecom services

• Insurance

• Fuel

• Other specified sectors

will attract a flat MDR of ₹5 per transaction instead of the standard 0.4% rate.

The ₹5 charge will also remain a merchant-side cost. Consumers will not have to add ₹5 to their payment amount.

For instance, if a railway ticket costs ₹3,000 and the passenger pays through UPI, the passenger will continue to pay ₹3,000, while the railway merchant will bear the applicable ₹5 MDR.

UPI Payments Up to ₹2,000 Remain Free

UPI transactions of up to ₹2,000 will remain outside the MDR framework.

The government had already notified that banks and payment system providers cannot impose direct or indirect charges on UPI transactions up to ₹2,000. The protection also covers RuPay-powered debit card payments.

NPCI has further stated that more than 95% of low-value UPI P2M transactions are expected to remain outside the MDR framework.

Person-to-Person UPI Payments Will Remain Free

There is also no change for people transferring money to one another.

If a person sends money to a friend, family member or another individual through UPI, the transaction will continue to remain free regardless of the amount.

The new MDR framework specifically concerns eligible Person-to-Merchant (P2M) transactions.

Small Merchants Get Relief - UPI Charges Above ₹2,000

Small merchants covered under the P2PM framework will continue to benefit from zero MDR.

The framework covers small vendors receiving up to ₹1 lakh per month through UPI QR payments directly into their bank accounts. -- UPI Charges Above ₹2,000

This is intended to protect small shops, local vendors and businesses from additional payment costs while maintaining widespread UPI adoption.

Why Has NPCI Introduced MDR?

NPCI says the revised framework is aimed at creating a sustainable revenue model for the UPI ecosystem.

Revenue generated through MDR on eligible higher-value transactions will support areas including:

• Payment infrastructure

• Cybersecurity

• Innovation

• System resilience

• Customer service

• Expansion of UPI acceptance

The framework also proposes a dedicated fund to support UPI acceptance among small merchants, particularly in Tier-3 cities and smaller markets.

When Will the New UPI Charges Start?

The revised MDR framework will become effective from October 15, 2026.

Until then, the new MDR structure is not yet applicable. Once implemented, it will affect only specified merchant-side transactions covered under the framework.

What This Means for Common UPI Users

For most consumers, the practical impact will be limited.

₹2,000 or below: No MDR.

₹2,000+ P2P transfer: Free.

₹2,000+ eligible merchant payment: Merchant pays 0.4% MDR, subject to ₹300 cap.

₹2,000+ railway, fuel, telecom or insurance payment: Merchant pays flat ₹5 MDR.

Consumer: No separate UPI transaction charge.

Bottom Line

The latest UPI announcement does not mean consumers will suddenly start paying a fee every time they make a UPI payment above ₹2,000.

From October 15, 2026, eligible merchant transactions above ₹2,000 will come under a revised MDR framework, with a 0.4% merchant charge capped at ₹300, while selected categories such as railways, telecom, insurance and fuel will have a flat ₹5 MDR.

For consumers, UPI remains free, including person-to-person transfers.