• Source:JND

Person-to-Merchant (P2M) transactions above Rs 2,000 will attract a 0.4 per cent Merchant Discount Rate (MDR). However, the fee will be shared among the facilitators, including banks and App providers, the government said on Tuesday. The revised MDR framework will come into effect from October 15, 2026. 

"A nominal MDR of 0.4% will be levied on P2M transactions above Rs 2,000. This commission will be shared amongst the payment ecosystem partners, including banks and app providers," the Ministry of Finance said.

Additionally, for high-value transactions of Rs 75,000 and above, MDR will be capped at Rs 300 per transaction. Meanwhile, according to the government, person-to-person (P2P) transactions will not attract any charges irrespective of transaction value.

"For person-to-person (P2P) transactions, there will be no charges at all, irrespective of transaction value. P2P transactions constitute 37 per cent of the total UPI transactions in volume terms and 70 per cent in value terms," the ministry stated.

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Essential Sectors To Attract Flat MDR

Spending through UPI on Essential sectors such as Railways, telecom, insurance, fuel, agriculture inputs, amongst others will pay a flat MDR of Rs 5 per transaction above Rs 2,000.

"This flat-rate model ensures cost stability in critical public services and thin-margin industries. Such Industry Program categories account for nearly 17 per cent of UPI P2M transaction volume and approximately 46 per cent of UPI merchant transaction value," the finance ministry said.

Capital market transactions

Payments made for mutual funds, securities, stock brokers, and dealers through UPI will attract a nominal MDR of 0.02 per cent, and the maximum MDR has been kept at Rs 300.

"This reduced rate encourages retail participation in formal financial markets," the government said.

Small Vendors Receiving Up To Rs 1 Lakh A Month Will Not Pay MDR

Small merchants--Street vendors and other small business owners-- who get up to Rs 1 lakh per month via UPI QR codes under the Person-to-Person-Merchant (P2PM) will not have to pay MDR.

"Small merchants receiving up to Rs 1 lakh per month via UPI QR codes under the Person-to-Person-Merchant (P2PM) classification will continue to enjoy mandatory zero MDR for all transactions," the ministry informed.

UPI App To Not Levy Platform Fee

The UPI app providers are explicitly prohibited from levying platform fees or hidden charges. Additionally, Banks have been advised to ensure that merchants do not pass MDR charges to customers for UPI payments.

Is There Any Monthly Quota For UPI Transaction

No--the ministry said that consumers have unlimited free usage. There are no monthly quotas, volume limits, or tiered caps on free UPI transactions for individuals.

Meanwhile, security caps would be there. The Daily transaction limits that have been enforced by banks and NPCI (Rs 1–5 lakh depending on category) are purely risk-management measures, and those will be there.


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