UPI MDR explained: Will customers be charged from October 15?

New Delhi, Sep 16 (UNI) New rules governing the Merchant Discount Rate (MDR) on certain UPI transactions have raised concerns among users over whether digital payments will become chargeable from October 15, 2026.

However, the new framework does not impose any direct charges on consumers for making UPI payments. The MDR is a fee linked to the merchant side of a digital transaction. It is paid within the payment ecosystem and does not mean that money will be deducted from a customer's bank account when they make a UPI payment.

Person-to-person (P2P) UPI transactions will continue to remain free. Merchant payments of up to Rs 2,000 will also not attract MDR. According to the government, these exemptions mean that around 96 per cent of merchant UPI transactions will remain outside the scope of the new charge. What is changing from October 15? Under the revised framework, a standard UPI Person-to-Merchant (P2M) transaction above Rs 2,000 will attract an MDR of 0.4 per cent. The charge is applicable on the merchant side and is paid to the acquiring bank as part of the digital payment ecosystem.

There is also a ceiling on the amount that can be charged. For transactions worth Rs 75,000 or more, MDR will be capped at Rs 300 per transaction. For example, if a customer makes a Rs 3,000 UPI payment at a merchant, the 0.4 per cent MDR works out to Rs 12. On a Rs 50,000 transaction, the charge would be Rs 200. If the transaction value is Rs 1 lakh, the 0.4 per cent calculation would be Rs 400, but the applicable MDR would be restricted to the Rs 300 cap.

Can merchants recover MDR from customers? No. The new framework does not permit merchants to pass the MDR directly to customers. The amount payable by the consumer remains the price displayed by the merchant. The National Payments Corporation of India (NPCI) has also clarified that customers will continue to use UPI without paying a transaction charge. This means users can continue making routine payments through their UPI apps without worrying about the new MDR being deducted from their accounts. Will sending money to family or to your own account cost more? No. P2P transactions remain outside the new MDR framework. Therefore, transferring Rs 1 lakh to a family member or moving money between your own bank accounts through UPI will continue to be free.

The new MDR also does not introduce a separate platform fee for consumers. UPI apps cannot levy a new user charge simply because a customer is making a UPI payment under this framework. What does the new MDR mean for consumers? For most users, there is no direct change in the cost of making UPI payments. The key change is on the merchant side, particularly for higher-value P2M transactions above Rs 2,000. In other words, a customer scanning a QR code to pay for a purchase will not see MDR deducted separately from their bank account.

The charge is part of the merchant-payment ecosystem rather than a fee imposed on the consumer.