UPI Rule Change: UPI users in India are set to see a new change from October 15, 2026. The National Payments Corporation of India (NPCI) has introduced a Merchant Discount Rate, or MDR, on selected UPI payments above Rs 2,000.
But this doesn’t mean you’ll be charged every time you use UPI for more than Rs 2,000. The new rule is mainly for certain person-to-merchant (P2M) payments. Money transfers between people will continue to stay free. The government has also said the MDR won’t be collected directly from customers.
MDR is basically a fee within the payment system. It is shared among different players such as banks, payment service providers and UPI app providers. It’s different from a new UPI transaction fee that users have to pay from their own pocket.
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How the New UPI MDR will Work?
For regular eligible merchant payments above Rs 2,000, the MDR will be 0.4%. There will also be a maximum limit of Rs 300 on larger transactions.
For example a Rs 10,000 eligible merchant payment would have an MDR of Rs 40. Once the transaction reaches Rs 75,000, the 0.4% calculation reaches Rs 300. After that, the charge stays capped at Rs 300.
| UPI Payment Type | MDR From October 15, 2026 |
|---|---|
| UPI AutoPay / Recurring Mandate | No prescribed MDR |
| Mutual Fund and Eligible Capital-Market Payments | 0.02%, capped at Rs 300 |
| Regular Eligible P2M Payment Above Rs 2,000 | 0.4% |
| P2M Transaction of Rs 75,000 or More | 0.4%, capped at Rs 300 |
| Insurance and Other Specified Essential-Sector Payments Above Rs 2,000 | Rs 5 per transaction |
UPI payments up to Rs 2,000 will remain outside the new MDR framework. Person-to-person payments such as sending money to a friend or family member will also remain free.
What Happens to SIPs, OTT and Other AutoPay Payments?
People using UPI for monthly payments don’t need to treat every recurring payment like a fresh transaction. UPI AutoPay and existing mandates are handled separately under the new framework.
This includes recurring payments for mutual fund SIPs, OTT subscriptions and other services. A SIP collected automatically through a UPI mandate won’t attract the prescribed MDR. The same applies to recurring payments made through eligible AutoPay arrangements.
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But a one-time payment for a mutual fund or another eligible capital-market service will fall under a different rate. Such payments will carry an MDR of 0.02% with a maximum of Rs 300 per transaction.
Insurance payments are also covered under a separate category. For specified insurance transactions above Rs 2,000, the MDR will be a flat Rs 5 instead of the regular 0.4% rate. The charge is part of the merchant payment system and isn’t a new fee that customers are required to pay directly.
The wider framework also gives special treatment to essential and thin-margin sectors such as railways, telecom, fuel and some agricultural payments. Eligible transactions above Rs 2,000 in these categories will attract a flat Rs 5 MDR.
What UPI Users Need to Know
The biggest point is that paying more than Rs 2,000 through UPI won’t automatically mean a customer will see an extra charge. The category of payment and the way it is made will decide whether MDR applies.
For normal daily UPI use, payments to friends and family remain free. Smaller merchant payments up to Rs 2,000 also remain outside the new MDR. Recurring AutoPay payments have separate treatment too.
The new system is being introduced as UPI handles a very large volume of digital payments in India. In August 2026 alone, UPI processed about 24.5 billion transactions worth nearly Rs 29,823 billion, according to Reuters.
