UPI MDR rules explained: Where will you pay more from October 15? Check charges and exemptions

The Merchant Discount Rate (MDR) will be introduced on select Person-to-Merchant (P2M) UPI transactions from October 15, with merchants paying 0.4% on payments above ₹2,000. However, the new framework has different rates and exemptions for small merchants, capital-market transactions and certain essential services.

Where will the 0.4% MDR apply?

For regular P2M transactions above ₹2,000, merchants will pay an MDR of 0.4%. The charge will be capped at ₹300 for transactions of ₹75,000 and above. A ₹3,000 payment, for instance, will attract ₹12, while a ₹50,000 payment will attract ₹200. A ₹1 lakh transaction, which would otherwise attract ₹400, will be capped at ₹300.

Transactions up to ₹2,000 will remain free, including for large commercial merchants.

Small merchants remain exempt

Small vendors covered under the Person-to-Person-Merchant (P2PM) framework will continue to enjoy zero MDR. The category covers small merchants receiving up to ₹1 lakh a month through UPI QR codes. Importantly, a small merchant will not be charged simply because an individual payment exceeds ₹2,000; MDR applicability depends on the merchant's overall account categorisation.

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Railways, insurance, fuel and utilities

Certain sectors will get a concessional flat MDR instead of the 0.4% rate. Railways, telecom services, insurance and fuel, among other specified categories, will attract a flat ₹5 MDR on transactions above ₹2,000.

Insurance premiums above ₹2,000 will therefore carry a ₹5 charge, while fuel purchases above the threshold at petrol pumps will also attract ₹5. Electricity, water and piped natural gas bill payments above ₹2,000 will similarly carry the flat ₹5 MDR. Payments below ₹2,000 remain free.

Mutual funds and stock-market payments

Capital-market transactions have a separate MDR structure. Payments to mutual funds, securities dealers, stockbrokers and investment platforms will attract 0.02% of the transaction value, subject to a maximum cap of ₹300. The framework covers payments for equity purchases, debt-market investments, mutual funds and broker wallet top-ups.

UPI MDR structure from October 15

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What about consumers and P2P payments?

Consumers will not be charged for making UPI payments. Person-to-person transactions, including transfers to family and friends or between a user's own accounts, will remain free irrespective of the amount. UPI apps will also not be allowed to impose a platform fee on UPI payments.

The MDR also cannot be passed on to buyers by merchants. Consumers will continue to pay the listed price for goods and services.

Credit-linked UPI payments, including RuPay credit cards linked to UPI and pre-sanctioned bank credit lines, will follow separate credit-product rules and are outside this direct account-to-merchant UPI MDR framework.