Person-to-merchant UPI payments over Rs 2,000 to attract MDR : What remains free, what will come under MDR and other things to know

The National Payments Corporation of India (NPCI) has introduced a 0.4% fee on person-to-merchant transactions exceeding Rs 2,000. Called Merchant Discount Rate (MDR), it is a charge that a merchant pays to a bank or payment service provider for processing a digital payment. Introduced under the Payment and Settlement Systems Act, 2007, the new MDR provision will come into effect from October 15, 2026. In an official press release, the government clarified that the new UPI framework will have “no impact on any person to person transactions”. “UPI will continue to remain completely free for all person-to-person transactions, irrespective of the amount transferred,” the release said. Instead, “the framework seeks to ensure the long-term sustainability of UPI while protecting individuals and small merchants from additional charges,” it stated.