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India’s published UPI merchant discount rate (MDR) framework is scheduled to take effect on 15 October 2026. The available official material does not confirm a delay or establish that retailer pressure changed the timetable. Under the Department of Financial Services’ (DFS) 15 September FAQ, a 0.4% MDR applies to covered person-to-merchant (P2M) UPI transactions above ₹2,000, subject to a ₹300 cap for transactions of ₹75,000 or more. The FAQ also describes a zero-MDR classification for qualifying small vendors; an individual payment’s amount alone does not determine whether a merchant is covered.
Is the UPI fee rollout delayed?
As of 13 October 2026, the latest specific effective date in the cited government material is 15 October 2026. The DFS FAQ, published on 15 September, says the selected MDR framework takes effect that day. The material available does not verify that implementation has been delayed, identify retailer groups that sought a delay, or establish that retailer pushback caused any schedule change. The title’s delay framing should therefore be treated as unverified, not as a confirmed policy development.
The earlier Ministry of Finance statement of 8 August 2026 said that any MDR, if introduced, would cover a limited set of merchant transactions above a threshold and would be nominal. The September FAQ supplied the specific rate structure and commencement date. These are statements of the announced policy; they do not by themselves establish what fees merchants will ultimately pay in practice.
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Merchant payments (P2M)
The announced charge concerns covered person-to-merchant transactions: a customer paying a merchant. The DFS FAQ specifies an MDR of 0.4% for covered P2M UPI transactions above ₹2,000. Transactions at or below ₹2,000 are not subject to this MDR under the stated framework.
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The FAQ says more than 95% of UPI P2M transaction volume is at or below ₹2,000. Separately, News On AIR reported government sources saying around 96% of UPI merchant transactions would remain unaffected. Those figures have different wording and denominators: the first refers to P2M transaction volume, while the second is reported as merchant transactions. They should not be treated as identical or as independently audited estimates.
Person-to-person transfers (P2P)
The policy FAQ says consumer payments and person-to-person transfers remain free. The MDR framework described here is for covered merchant transactions, not a general fee on sending money to another individual.
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How the rate and cap work
For a covered transaction above ₹2,000, the stated rate is 0.4% of the transaction amount. At ₹75,000 and above, the FAQ sets a maximum MDR of ₹300 per transaction. The cap is a ceiling, not a separate flat charge: at ₹75,000, 0.4% is ₹300; for a larger covered transaction, the stated cap limits the MDR to ₹300.
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| Transaction or category | Announced treatment |
|---|---|
| Covered P2M transaction of ₹2,000 or less | No MDR under the stated framework |
| Covered P2M transaction above ₹2,000 and below ₹75,000 | 0.4% MDR |
| Covered P2M transaction of ₹75,000 or more | 0.4% rate, capped at ₹300 per transaction |
| Qualifying small-vendor category | Zero-MDR classification, subject to the account categorization and threshold described below |
| P2P transfer | Free, according to the DFS FAQ |
These terms do not mean every payment above ₹2,000 automatically attracts an MDR. The FAQ says small vendors may be classified as zero-MDR where their monthly UPI receipts are up to ₹1 lakh, and says applicability depends on merchant-account categorization. The relevant classification is therefore important alongside transaction value. The FAQ does not establish that every individual merchant or every payment above the threshold is covered.
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Who pays, and can the fee be passed to customers?
MDR is a merchant-side payment acceptance fee in the announced structure. The DFS FAQ says UPI app providers are not to add a platform fee. News On AIR reported government sources saying banks had been advised to ensure merchants do not pass MDR on to customers. That is the stated policy position, not proof that every merchant will behave accordingly in practice.
For consumers, the FAQ’s stated position is that ordinary consumer payments and P2P transfers remain free. If a merchant adds a separate amount at checkout or otherwise describes a payment surcharge, that should not be confused with a government announcement that UPI consumers will be charged an app platform fee: the FAQ expressly says app providers are not to add one.
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Why does the government say the framework is needed?
The DFS FAQ presents the MDR as funding for the UPI ecosystem, citing infrastructure resilience, innovation, cybersecurity and customer service. It states: “The MDR is distributed only amongst the UPI ecosystem, to further invest into infrastructure resiliency, innovation, cybersecurity (protecting the UPI Infrastructure with banks and non-banks) and customer service.” This is institutional policy language from the Department of Financial Services’ 15 September 2026 FAQ, not an independent assessment of the fee’s effects.
The FAQ also describes a proposed dedicated fund for small-merchant infrastructure and onboarding support. It says the UPI and Services Steering Committee, headed by NPCI, decides operational parameters, fee-distribution models and category caps. These descriptions set out the government’s stated plans and governance arrangements; they do not quantify how much an individual merchant will receive or establish the eventual impact on merchant costs.
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The government’s broader figures illustrate the scale of the payment system, not the MDR’s likely effect on any one business. The Ministry of Finance reported that UPI accounted for 81% of India’s retail digital-payment transactions in FY 2024–25. The same ministry reported 22,167.90 crore retail digital-payment transactions worth ₹849.12 lakh crore in that financial year. It also reported deployments under the Payment Infrastructure Development Fund of 5.80 crore digital touch points and about 56.86 crore QR codes. These figures were published by PIB on 16 March 2026.
The DFS FAQ says the UPI MDR is below typical card MDRs, but that is the government’s comparison. The cited FAQ does not independently verify realized fees or merchant-level impact, so it should not be read as a measured comparison of what individual businesses actually pay.
Quick Recap
What merchants and consumers should check
- Check the date: the published framework’s stated start date is 15 October 2026; the cited material does not confirm a postponement.
- Check payment type: the described MDR concerns covered P2M merchant payments, not P2P transfers.
- Check both thresholds: the rate applies to covered transactions above ₹2,000, with a ₹300 cap from ₹75,000 upward.
- Check account classification: the small-vendor zero-MDR category is described with monthly UPI receipts up to ₹1 lakh, and applicability depends on how the merchant account is categorized.
- Separate policy from practice: the government says app providers must not add a platform fee and reports that banks were advised against merchants passing MDR to customers; those statements do not establish what every merchant will do.
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