UPI New Fee Rules: The National Payments Corporation of India (NPCI) has released new FAQs on September 15, 2026, explaining the upcoming Merchant Discount Rate (MDR) rules for some UPI payments. The new system will start from October 15, 2026.
The biggest point is simple: UPI won’t become a paid service for normal users. Person-to-person payments will stay free, and merchant payments up to ₹2,000 will also have no MDR. The new charge mainly applies to selected higher-value P2M payments.
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What is the new UPI MDR?
Under the new framework, eligible UPI P2M transactions above ₹2,000 will carry an MDR of 0.4%. The charge will be taken from the merchant-side payment system and can’t be added to the customer’s bill.
For payments of ₹75,000 or more, the MDR will have a maximum limit of ₹300 per transaction. So, even when 0.4% works out to more than ₹300, the merchant won’t pay more than the cap. Some important examples are:
- ₹3,000 payment: 0.4% MDR = ₹12.
- ₹50,000 payment: 0.4% MDR = ₹200.
- ₹1 lakh payment: 0.4% comes to ₹400, but the ₹300 cap will apply.
- ₹2,000 or less: Zero MDR.
Certain sectors will get a special flat rate. Railways, telecom, insurance, fuel and some utility services will have a ₹5 MDR on eligible payments above ₹2,000. This is meant to avoid a large fee on essential services and sectors where margins can be low.
Education payments
Education payments are also covered under the designated industry programme. This includes school fees, university fees and institutional entrance examination payments. Eligible payments above ₹2,000 can use the applicable flat or capped structure while smaller payments stay free.
Insurance premium payments above ₹2,000 will also get the ₹5 flat MDR. Fuel payments above ₹2,000 and selected public utility payments will follow the same concessional rate.
Will customers have to pay anything?
No. NPCI has made it clear that customers won’t be charged MDR when they make UPI payments. A shopper scanning a QR code at a local shop also won’t have to pay an extra fee.
P2P payments will remain free regardless of the amount. This includes sending money to family or friends and transferring money between your own linked bank accounts. UPI apps also won’t be allowed to add a platform fee for these payments.
Recurring UPI payments made through mandates or AutoPay are also outside the prescribed MDR transaction charges.
Small Vendors Extra Exemption
Small vendors get an extra exemption through the P2PM category. Eligible small merchants receiving up to ₹1 lakh per month through UPI QR codes can continue with zero MDR. A payment above ₹2,000 by itself won’t automatically make such a merchant liable for MDR. Acquiring banks will track the merchant’s collections, and merchants crossing ₹1 lakh for three straight months can be moved into the P2M category. Existing QR codes and soundboxes won’t need to be replaced because of these changes.
Why is NPCI bringing MDR now?
NPCI says UPI handles billions of payments every month. The money from MDR is expected to stay within the UPI ecosystem and support infrastructure, cybersecurity, innovation and customer service. Around 95% or more of small-value P2M transactions will remain outside the new charge structure.
The new system is also aimed at reducing long-term dependence on government support. Industry estimates put UPI’s yearly operating costs at around ₹20,000 crore. NPCI says a commercial model can give the payment system a more stable source of funding.
A dedicated fund is also planned for smaller merchants, especially in Tier 3 to Tier 6 areas, the Northeast, Jammu and Kashmir and Ladakh. Support can also cover selected government schemes and merchant onboarding.
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Capital-market payments will follow a separate rate. UPI payments involving mutual funds, securities, stockbrokers and other covered investment services will attract 0.02% MDR, with a maximum of ₹300 per transaction.
The new MDR framework will take effect on October 15, 2026. Credit-linked UPI payments such as RuPay credit cards and pre-sanctioned bank credit lines will follow separate rules and aren’t covered by this direct bank-account MDR framework.
