MDR on UPI: What it means for customers
Decision on levy likely soon by NPCI Committee; expectation of 0.4% MDR on UPI transactions above Rs 2,000 to merchants
- Sep 15, 2026,
- Updated Sep 15, 2026 2:21 PM IST
Payments above Rs 2,000 through UPI are likely to attract a merchant discount rate soon. The finance ministry on September 14 notified the Merchant Discount Rate (MDR) on payments through RuPay debit cards and UPI transactions above Rs 2,000 made to merchants, paving the way for MDR to be levied on these payments.
The UPI and Services Steering Committee of the National Payments Corporation of India or NPCI will decide on the exact rate for transactions as well as the merchants that will be impacted. The Committee has 22 members, including banks, payment players and industry bodies, including the Payments Council of India and Indian Banks’ Association.
READ THIS: Finance Ministry bars charges on UPI transactions up to Rs 2,000
For consumers and small merchants, the effect is expected to be minimal. Indications are that an MDR of about 0.4% will be charged on transactions above Rs 2,000, ensuring that day-to-day small-ticket payments for items like groceries, transport, and similar purchases will remain unimpacted by the move.
Larger merchants and high-value transactions will attract an MDR, and the Committee will decide how the costs will be borne by the merchants, and how it will be split between the banks, payment aggregators and apps.
An MDR of anywhere between 1%-3% is also charged on credit cards, while a slightly lower MDR is also levied on debit card payments at about 0.8 to 0.9% of the transaction value, which is also typically borne by the merchant.
Sources have indicated that about 96% of transactions will remain outside the purview of MDR and only 4-5% of the large merchants will be impacted. A recent report by CareEdge Ratings noted that person-to-merchant (P2M) transactions constitute 29% of total UPI transaction value, with 67.2% of P2M transaction value exceeding Rs 2,000. “This implies that only about 19.5% of the value of overall UPI transactions potentially falls within the potential MDR threshold as of FY26, suggesting that the framework is targeted towards a relatively narrow segment of the ecosystem,” it said.
ALSO READ: NPCI to discuss MDR rates for UPI transactions above ₹2,000 today, say sources
Based on a potential MDR-addressable pool of Rs 61.13 lakh crore in FY26, a nominal MDR of 0.25% to 0.50% on select higher-value merchant transactions could generate a gross revenue opportunity of Rs 15,000 crore to Rs 30,000 crore, while keeping consumers and P2P payments free, it had further noted.
Prior to 2020, the Reserve Bank of India permitted an MDR of 0.40% to 0.90% on the transaction value on debit card payments across all card networks. An MDR of up to 0.30% with a maximum cap of Rs 100 per transaction was applicable on UPI P2M transactions. The zero MDR policy for RuPay debit cards and UPI platforms was only introduced in 2020 to boost the adoption of the digital payment system.
Payments above Rs 2,000 through UPI are likely to attract a merchant discount rate soon. The finance ministry on September 14 notified the Merchant Discount Rate (MDR) on payments through RuPay debit cards and UPI transactions above Rs 2,000 made to merchants, paving the way for MDR to be levied on these payments.
The UPI and Services Steering Committee of the National Payments Corporation of India or NPCI will decide on the exact rate for transactions as well as the merchants that will be impacted. The Committee has 22 members, including banks, payment players and industry bodies, including the Payments Council of India and Indian Banks’ Association.
READ THIS: Finance Ministry bars charges on UPI transactions up to Rs 2,000
For consumers and small merchants, the effect is expected to be minimal. Indications are that an MDR of about 0.4% will be charged on transactions above Rs 2,000, ensuring that day-to-day small-ticket payments for items like groceries, transport, and similar purchases will remain unimpacted by the move.
Larger merchants and high-value transactions will attract an MDR, and the Committee will decide how the costs will be borne by the merchants, and how it will be split between the banks, payment aggregators and apps.
An MDR of anywhere between 1%-3% is also charged on credit cards, while a slightly lower MDR is also levied on debit card payments at about 0.8 to 0.9% of the transaction value, which is also typically borne by the merchant.
Sources have indicated that about 96% of transactions will remain outside the purview of MDR and only 4-5% of the large merchants will be impacted. A recent report by CareEdge Ratings noted that person-to-merchant (P2M) transactions constitute 29% of total UPI transaction value, with 67.2% of P2M transaction value exceeding Rs 2,000. “This implies that only about 19.5% of the value of overall UPI transactions potentially falls within the potential MDR threshold as of FY26, suggesting that the framework is targeted towards a relatively narrow segment of the ecosystem,” it said.
ALSO READ: NPCI to discuss MDR rates for UPI transactions above ₹2,000 today, say sources
Based on a potential MDR-addressable pool of Rs 61.13 lakh crore in FY26, a nominal MDR of 0.25% to 0.50% on select higher-value merchant transactions could generate a gross revenue opportunity of Rs 15,000 crore to Rs 30,000 crore, while keeping consumers and P2P payments free, it had further noted.
Prior to 2020, the Reserve Bank of India permitted an MDR of 0.40% to 0.90% on the transaction value on debit card payments across all card networks. An MDR of up to 0.30% with a maximum cap of Rs 100 per transaction was applicable on UPI P2M transactions. The zero MDR policy for RuPay debit cards and UPI platforms was only introduced in 2020 to boost the adoption of the digital payment system.