NPCI Implements 0.4% MDR on UPI Transactions Over ₹2,000 from 2026

The National Payments Corporation of India (NPCI) has announced the introduction of a Merchant Discount Rate (MDR) for Unified Payments Interface (UPI) transactions. Effective from 15 October 2026, a fee of 0.4% will be applicable on person-to-merchant transactions exceeding ₹2,000. This move aims to enhance the sustainability of the UPI ecosystem, supporting financial infrastructure and growth.

The MDR is a charge borne by merchants when payments are processed through digital platforms. It helps cover costs incurred by payment service providers. While this new fee will apply to higher transaction amounts, transactions below ₹2,000 will remain exempt from additional charges, ensuring continued access for smaller transactions.

NPCI's decision has raised discussions among stakeholders in the digital payments sector. According to the NPCI, the implementation is designed to support both the overarching goals of financial inclusion and the financial viability of payment networks.

Some analysts expect this initiative may lead to increased operational costs for businesses, particularly small and medium-sized enterprises that rely heavily on digital transactions. The NPCI has stated it aims to assist in easing these potential financial burdens for smaller merchants, who will not be affected by the MDR on lower-value transactions.

The UPI platform has become a dominant form of payment across India, recording trillions of rupees in transactions since its inception. Stakeholders within the industry are closely monitoring the implications of the MDR, as they prepare for its rollout in 2026. This fee's introduction is part of ongoing efforts by the Indian government and financial institutions to create a sustainable digital payment ecosystem while nurturing growth in this emerging market segment.

Officials from NPCI made it clear that this change is integral to sustaining UPI's momentum and overall health. As digital transactions continue to expand, they emphasise the need for a framework that balances growth while maintaining security and accessibility for users and merchants alike.