UPI MDR: Finance Minister Nirmala Sitharaman Says Customers Will Not Bear The Charge
A new Merchant Discount Rate (MDR) for certain UPI merchant payments will come into effect from October 15, 2026. The change has raised questions about whether people will have to pay extra when making UPI payments above ₹2,000.
Finance Minister Nirmala Sitharaman has clarified that the MDR is not a charge that will be imposed on customers. She also said that it is not a tax, cess or surcharge collected by the government.
The fee will be shared between the merchant and the payment institution involved in processing the transaction. The amount will not be transferred to the government.
Sitharaman compared the arrangement with MDR applicable to credit and debit card payments. Although MDR applies to card transactions, merchants generally do not add the charge separately to customers' bills.
For transactions of ₹75,000 or more, the MDR will be capped at ₹300. Meanwhile, individual-to-person UPI transfers will continue to remain outside the MDR framework.
Many merchant UPI payments of up to ₹2,000 will also remain fee-free.
A separate arrangement has also been made for small businesses, providing relief to smaller traders under the new system.
For eligible UPI payments above ₹2,000 in sectors such as railways, telecom, insurance and fuel, a fixed MDR of ₹5 will apply instead of the 0.4 percent rate.
The move is also aimed at supporting the long-term sustainability of the digital payments system.
The Finance Ministry is expected to hold discussions with banks and trade associations to ensure that the MDR burden is not passed on to customers. Talks will also be held with the Indian Banks' Association on the issue.
For UPI users, the key point is that the new MDR is not a government tax or a direct customer charge. The impact will primarily be within the merchant and payment ecosystem, while a large majority of merchant UPI transactions will continue to remain outside the new charge.
Finance Minister Nirmala Sitharaman has clarified that the MDR is not a charge that will be imposed on customers. She also said that it is not a tax, cess or surcharge collected by the government.
Who Will Pay The MDR?
Under the new framework announced by the National Payments Corporation of India (NPCI), individual-to-merchant UPI transactions above ₹2,000 will attract an MDR of 0.4 percent.The fee will be shared between the merchant and the payment institution involved in processing the transaction. The amount will not be transferred to the government.
Sitharaman compared the arrangement with MDR applicable to credit and debit card payments. Although MDR applies to card transactions, merchants generally do not add the charge separately to customers' bills.
What Happens To Payments Above ₹2,000?
The new framework will apply to eligible individual-to-merchant UPI payments exceeding ₹2,000.For transactions of ₹75,000 or more, the MDR will be capped at ₹300. Meanwhile, individual-to-person UPI transfers will continue to remain outside the MDR framework.
Many merchant UPI payments of up to ₹2,000 will also remain fee-free.
Most UPI Merchant Payments To Remain Exempt
According to the government, the new MDR framework will have no impact on most UPI merchant transactions. Around 96 percent of merchant UPI transactions are expected to remain exempt from the change.You may also like
- India loses 6.2 million LPG customers in months, connections drop from 333.9 million to 327.7 million, reversing a decade of growth as Iran war squeezes Gulf supplies and oil firms halt new connections
- NSE to list on own platform? Chairman hints at possibility
- Gold price prediction: Is gold ripe for buy on dips strategy? Check September 25, 2026 outlook
- Manpower Crunch Hits J&K Health Sector, 12,600+ Posts Vacant
- $990B AI capex bet: Why Chris Wood sees India's IT advantage
A separate arrangement has also been made for small businesses, providing relief to smaller traders under the new system.
For eligible UPI payments above ₹2,000 in sectors such as railways, telecom, insurance and fuel, a fixed MDR of ₹5 will apply instead of the 0.4 percent rate.
Why Is MDR Being Introduced?
The government says the MDR is intended to help manage the costs incurred by banks, payment service providers and other participants involved in the UPI ecosystem.The move is also aimed at supporting the long-term sustainability of the digital payments system.
The Finance Ministry is expected to hold discussions with banks and trade associations to ensure that the MDR burden is not passed on to customers. Talks will also be held with the Indian Banks' Association on the issue.
For UPI users, the key point is that the new MDR is not a government tax or a direct customer charge. The impact will primarily be within the merchant and payment ecosystem, while a large majority of merchant UPI transactions will continue to remain outside the new charge.
Loving Newspoint? Download the app now
