Understanding UPI Payment Charges

16-Sep-2026 12:57 PM

New Delhi. A decision to implement a Merchant Discount Rate (MDR) on select UPI transactions starting October 15, 2026, has created confusion among merchants. People are trying to understand whether users will be required to pay charges when making UPI payments. The short answer is—no.

In reality, the new MDR is a charge levied within the merchant-payment ecosystem. It is not a fee that customers have to pay when conducting UPI transactions with merchants. Person-to-person (P2P) UPI transfers will remain completely free of charges, and there will be no charge on payments made to merchants up to ₹2,000. The government states that approximately 96 percent of merchant UPI transactions will remain unaffected by this new provision.

However, costs on the merchant's end will change for certain merchant transactions exceeding ₹2,000. The Merchant Discount Rate (MDR) is a fee associated with accepting digital payments. Under the new framework, if a person makes a UPI payment to a merchant exceeding ₹2,000 for a transaction, a standard MDR of 0.4 percent will apply.

A maximum MDR cap of ₹300 per transaction has been set for transactions of ₹75,000 or more. This new rule is set to come into effect on October 15, 2026.