RBI Backs 0.4% MDR on Large UPI Payments
The Reserve Bank of India has backed the introduction of a 0.4% Merchant Discount Rate on larger UPI merchant payments, saying the change will strengthen the long-term sustainability of India’s digital payments ecosystem. The revised framework will take effect from October 15, 2026.
UPI Payments Above ₹2,000 Face 0.4% MDR
Under the new structure, person-to-merchant UPI transactions above ₹2,000 will attract an MDR of 0.4%. The charge will be paid within the merchant payment ecosystem and will not be directly levied on customers making UPI payments.
For transactions of ₹75,000 or more, the MDR will be capped at ₹300 per transaction. The fee represents the cost charged to merchants for accepting payments through the digital network.
Person-to-person UPI transfers will continue to remain free.
Small UPI Payments Remain Free for Merchants
Merchant transactions of up to ₹2,000 will continue to attract zero MDR. These smaller payments account for more than 95% of person-to-merchant UPI transactions by volume, limiting the direct impact of the new framework on everyday digital payments.
The government has maintained that consumers will not be required to pay any additional UPI charge under the revised system.
RBI Backs Sustainable UPI Funding Model
The RBI said distributing MDR revenue fairly among banks, payment providers and other ecosystem participants would support continued investment in technology, infrastructure and payment acceptance networks.
The central bank said a sustainable funding model would help UPI expand further while supporting innovation and maintaining reliable payment infrastructure.
The new rates provide banks, payment aggregators, fintech firms and businesses approximately one month to update their payment and accounting systems before implementation.
