UPI daily limit vs ₹2,000 MDR threshold: What is the difference?

UPI users may come across two different numbers while making digital payments: the UPI transaction limit and the new ₹2,000 MDR threshold. Although both relate to UPI transactions, they serve completely different purposes and should not be confused.

Under the new framework, the ₹2,000 threshold determines whether Merchant Discount Rate (MDR) can apply to specified person-to-merchant (P2M) transactions. The UPI transaction limit, meanwhile, determines how much a user can transfer through UPI and is primarily linked to security and risk management.

What is the ₹2,000 MDR threshold?

From October 15, 2026, MDR will apply to specified merchant transactions above ₹2,000. Merchant payments of ₹2,000 or less will remain outside the MDR framework.

For standard specified merchant transactions above ₹2,000, the MDR rate is 0.4%, subject to a maximum of ₹300.

For example, a ₹5,000 transaction would have an MDR of ₹20, while a ₹50,000 transaction would result in ₹200. For a ₹1 lakh transaction, 0.4% would mathematically be ₹400, but the ₹300 cap would apply.

Importantly, MDR is a fee within the payment ecosystem and is not intended to be a direct charge on the customer.

What is the UPI transaction limit?

The UPI transaction limit is a separate concept. Banks and NPCI can prescribe transaction limits depending on the transaction category. These limits are primarily intended for security and risk management.

The source notes that such limits can generally range from ₹1 lakh to ₹5 lakh, depending on the transaction category.

This means the fact that you can make a UPI payment above ₹2,000 does not automatically mean that the payment will attract MDR. MDR depends on the type and value of the transaction, while the UPI limit determines whether the transaction can be processed within the applicable payment ceiling.

Why the distinction matters

Consider a user making a ₹10,000 UPI payment. The amount is above the ₹2,000 MDR threshold, but whether MDR applies depends on what the payment is for and who is receiving it.

A person-to-person transfer remains free, according to the framework. A specified merchant transaction above ₹2,000 can attract MDR. Certain sectors, including railways, telecom, insurance, fuel and agricultural inputs, have a separate ₹5 MDR for transactions above ₹2,000.

Capital-market transactions have another structure: 0.02% MDR, capped at ₹300.

Therefore, users should not treat ₹2,000 as a new UPI transaction limit. It is an MDR threshold for specified merchant payments, whereas the UPI transaction limit is the maximum amount permitted for a particular category of UPI transaction.