UPI transactions above ₹2,000 to face MDR from October 15; P2P transfers remain free

Transactions above ₹2,000 between a person and a merchant will attract MDR from October 15, while small-value UPI and P2P transactions will remain free.

Starting October 15, transactions exceeding ₹2,000 between individuals and merchants (P2M) will incur Merchant Discount Rate (MDR) at 0.4%, resulting in an additional charge of ₹12 on a ₹3,000 transaction.

Simultaneously, stock markets and mutual funds will benefit from reduced MDR rates at 0.02%, capped at ₹300. Transactions above ₹75,000 will also have a maximum MDR limit of ₹300. Certain merchant categories, such as railways, telecom services, insurance, and fuel, will face a flat MDR of ₹5 per transaction for amounts exceeding ₹2,000.

Small-value UPI transactions remain free

These policies are outlined in the National Payments Corporation of India’s (NPCI) frequently asked questions following the Finance Ministry’s amendment to the Payment & Settlement Systems Act. According to NPCI, over 95% of all UPI (P2M) transactions fall under the ₹2,000 threshold, leaving these unaffected. NPCI emphasized that implementing reasonable MDR ensures UPI remains accessible and sustainable for daily use.

Additionally, person-to-person (P2P) transactions will continue to be fee-free for both sender and receiver. Whether transferring money to family, splitting bills, or moving funds between personal accounts, no charges apply. “All UPI transfers of any permitted amount, including self-transfers, remain free,” NPCI stated.

Dedicated fund to support digital payments

A specialized fund will be established to boost digital payment infrastructure nationwide. NPCI clarified that this fund will provide subsidies and financial aid to ecosystem partners for merchant onboarding and to encourage UPI adoption among small merchants.

The fund aims to expand UPI acceptance by offering financial support to payment aggregators and acquiring banks for initiatives targeting small merchants, especially in rural areas and Tier III cities.

NPCI highlights lower MDR than cards

NPCI noted that UPI’s MDR rates are significantly lower than those for traditional payment methods. Credit card MDRs typically range from 1.5% to 2.5% per transaction, while debit card MDRs are capped at 0.9%. The organization explained that introducing MDR creates a sustainable revenue model, encouraging fintech startups and tech firms to invest in the digital payments sector. Without revenue, only large tech companies could sustain prolonged losses, stifling innovation.

“A transparent commercial framework ensures fair competition, enabling smaller players to develop specialized payment solutions and enhance financial access,” NPCI said. Revenue generated will also fund advancements in cybersecurity, fraud detection AI systems, and encryption upgrades.

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Published on September 15, 2026