NPCI to discuss MDR rates for UPI transactions above ₹2,000 today, say sources

The National Payments Corporation of India (NPCI) is set to hold a meeting on merchant discount rate (MDR) for UPI transactions above ₹2,000 today, following the government’s notification clarifying charges applicable to digital payments below the ₹2,000 threshold. The move comes a day after the government formally barred banks and payment system providers from imposing charges on UPI transactions up to ₹2,000.

What does the government notification say?

According to the September 14 government gazette notification, no charges can be imposed on UPI transactions of up to ₹2,000. The provision also covers payments of up to ₹2,000 made through RuPay-powered debit cards.

The notification makes clear that the restriction applies to both sides of a transaction. It states that no bank or system provider can impose any direct or indirect charge on a person making or receiving a payment through these modes.

UPI charges above ₹2,000: What you need to know

What has the government changed?

Banks and payment system providers cannot charge a fee on UPI transactions of up to ₹2,000. Payments above ₹2,000 are not covered by this exemption, opening the door for charges such as Merchant Discount Rate (MDR).

What is MDR?

MDR is a fee paid for processing digital payments. It is usually shared among banks and other entities involved in the transaction. Credit cards typically attract 1-3% MDR, while debit cards can attract up to 0.9%.

Does UPI currently have MDR?

No. UPI has operated under a zero-MDR regime since January 2020.

Will consumers have to pay?

Not directly, based on the government’s current position. MDR is charged to merchants. However, merchants could potentially pass the cost on to customers, as sometimes happens with card payments.

Will all UPI payments above ₹2,000 be charged?

Not necessarily. The government has indicated that any future MDR would apply only to a limited set of high-value merchant transactions at a nominal rate. Person-to-person (P2P) payments will remain free.

Why does this matter?

High-value merchant payments account for a small share of UPI transactions by volume but a much larger share by value. In FY26, transactions above ₹2,000 made up about two-thirds of P2M UPI payment value.

How could payment behaviour change?

A LocalCircles survey found that only 12% of respondents would continue using UPI for payments above ₹3,000 at large merchants if a fee were imposed.

Why introduce MDR now?

UPI has more than 55 crore users and involves over 700 banks and payment companies. Maintaining infrastructure, cybersecurity and fraud-prevention systems is expensive.

What does the government want?

It says a limited MDR could make UPI financially sustainable, encourage competition and reduce dependence on government subsidies.