When merchants receive payments of more than Rs 2,000 via UPI from October 15 onwards, they will have to pay a fee of 0.4 per cent, National Payments Corporation of India (NPCI) said on Tuesday, September 15. This fee is called Merchant Discount Rate (MDR).
The notification from NPCI came a day after the finance ministry notified that banks or service providers cannot charge smaller-value payments of up to Rs 2,000 and RuPay debit card payments.
“UPI services will continue without any cost to consumers. Consumers can continue to transact free-of-cost using UPI as they have been doing till now,” NPCI made it clear.
As per NPCI’s notification, MDR will be capped at Rs 300 per person-to-merchant (P2M) UPI transaction, which means merchants will pay only ₹300 no matter how much payment above ₹2,000 they receive per transaction. ₹300 is 0.4% of ₹75,000, which means a merchant would pay ₹300 for receiving a payment of ₹75,000. But with the capping rule in place, merchants will pay only ₹300 no matter how much money above ₹75,000 they receive via UPI in a transaction.
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A flat MDR instead of one at a percentage rate has been introduced fir certain merchant categories. Specific merchant categories such as Indian Railways, telecom services, insurance, and fuel dealers will pay a flat MDR of ₹5 per transaction for receiving payments of more than Rs 2,000 via UPI, as per the NPCI notification.
“Rather than applying a 0.4% variable rate, these specific sectors pay a fixed fee of ₹5 regardless of the transaction amount. This flat-rate model prevents cost escalations in critical public services, utility bill collection, and thin-margin sectors like fuel retail. It ensures that essential consumer services remain low-cost and digitally efficient,” said the NPCI notification.
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The flat-rate model was introduced with the aim of preventing cost escalations in critical public services, utility bill collection, and thin-margin sectors like fuel retail. “It ensures that essential consumer services remain low-cost and digitally efficient,” NPCI said.
UPI processed as many as 2,451 crore transactions valued at ₹29.9 lakh crore in August 2026 alone, said NPCI. “This immense volume highlights UPI’s role as the primary financial engine of the Indian economy, handling hundreds of millions of daily payments. Handling this scale requires massive physical server infrastructure, high-speed telecommunication lines, multi-tiered cybersecurity monitoring, and specialised banking software. These transaction figures reinforce why establishing a self-sustaining funding framework was necessary to guarantee system stability,” it added.
