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Not directly at the point of payment, under the framework described by the Ministry of Finance in September 2026. The ministry said consumers would not be charged a UPI transaction fee, while a merchant discount rate (MDR) could apply to certain merchant payments above ₹2,000. IIT Bombay’s report, as described by PTI on October 11, warns that such fees could undermine public trust. But the available sources do not show that merchants have passed UPI MDR on through higher prices or surcharges.
What UPI MDR means for customers
MDR is a fee associated with processing a merchant payment. In the framework described by the Ministry of Finance, it is paid by the merchant, not debited directly from the customer’s UPI transaction. That distinction does not rule out indirect effects: a business might respond to costs through prices or other decisions. However, the available sources do not establish whether, or how much, the 2026 UPI MDR has been passed on to consumers.
The Ministry of Finance said on September 15, 2026, that person-to-person (P2P) UPI payments remained free, as did payments to merchants up to ₹2,000 and transactions covered by small-merchant zero-MDR rules. It estimated that approximately 96% of person-to-merchant (P2M) transactions would be unaffected. That percentage is the government’s estimate, not an independent measurement. Ministry of Finance, September 15, 2026
What the reported MDR rules say about payments above ₹2,000
The ministry said MDR applied to specified merchant transactions above ₹2,000, with the amount distributed among payment ecosystem participants. PTI’s October 11 account of a September NPCI circular reported these additional details:
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| Transaction category | Reported fee | Qualification |
|---|---|---|
| Specified P2M UPI payments above ₹2,000 | 0.4% MDR, capped at ₹300 for transactions of ₹75,000 or more | Details attributed to the NPCI circular by PTI; confirm the operative rate and categories against the circular. |
| Specified essential services above ₹2,000 | Flat ₹5 | Details attributed to the NPCI circular by PTI; covered services should be checked against the circular. |
| Capital-markets transactions | 0.02%, also capped at ₹300 | Details attributed to the NPCI circular by PTI; confirm the scope against the circular. |
These are reported merchant-side fees, not charges stated to be debited from a customer’s UPI account. The exact categories, exemptions and implementation depend on the operative NPCI circular; the full circular is not available in the sources cited here. PTI, October 11, 2026
What IIT Bombay reportedly recommends
PTI reports that IIT Bombay’s report, titled “UPI at a Crossroads: Reintroducing the MDR,” argues that UPI’s convenience and productivity benefits outweigh the incremental revenue from merchant transaction fees. It warns that the proposed framework could harm public trust and recommends rationalising fees.
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Limit remuneration by merchant turnover
One reported option is to focus remuneration on merchants with annual turnover above ₹50 crore. PTI says the report estimates this approach would account for about 90% of NPCI’s proposed MDR. That figure is the report’s estimate as reported by PTI; the original report and its methodology were not available for verification.
Consider online merchant payments and exemptions
The report also reportedly discusses applying a reasonable charge across online P2M transactions, particularly e-commerce, and exempting debt collection and loan EMI repayments from MDR. These are attributed recommendations, not confirmed features of the operative framework. PTI quoted the report as arguing that a charge on e-commerce merchants, which cannot transact in cash, would better fit the digital-payment facilitation they provide. PTI’s account of the report
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Does the surcharge ban apply to UPI payments?
The sources cited here do not establish the full current legal scope of a UPI-specific surcharge prohibition. They do establish a narrower historical point: an RBI circular from September 2016 warned, in the context of debit-card MDR, that bundling merchant charges could give merchants scope to pass costs to customers as a surcharge. That card-related warning is not proof that a UPI surcharge is permitted, that one is being imposed, or that UPI MDR has raised consumer prices. RBI circular, September 2016
Do not conflate a merchant-paid MDR with a direct UPI transaction fee to the customer. Nor should a merchant’s possible response through general pricing be described as a UPI surcharge without evidence that the specific practice occurred and is covered by the relevant rule.
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Why the fee debate involves more than consumer prices
Payment systems need funding for their operation, but charges can also affect whether merchants and customers adopt digital payments. The RBI’s payment-systems report describes this general trade-off: high costs may discourage digital payment use, while costs that are too low may fail to remunerate investment. Separately, the government said in 2026 that MDR collected from specified merchant transactions would be distributed among ecosystem participants. Neither point establishes the net effect of the reported framework on adoption, merchant costs or consumer prices.
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1Clear out junk files and repair common Windows errors2Fix the driver behind crashes, sound loss and screen glitches3Repair Windows errors before they cause bigger problemsThe IIT Bombay recommendations, as reported, reflect the same balancing problem: who should pay, which transactions or merchants should be covered, and how to support the payment ecosystem without discouraging use or weakening trust. The reported proposals do not come with a quantified comparison of their effects on consumers, small merchants, essential services or repayment transactions.
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What is established—and what remains uncertain
- Established as the ministry’s September 2026 position: P2P payments remained free, certain merchant payments were exempt, and approximately 96% of P2M transactions would be unaffected, according to the government’s estimate.
- Reported secondarily: PTI’s account of the NPCI circular provides specific rates and categories, while its report describes IIT Bombay’s recommendations and the 90% estimate.
- Not established by these sources: whether UPI MDR has caused higher prices, how often consumers face a UPI surcharge, or the full present legal scope of a UPI-specific surcharge ban.
- Historical context only: from January 1, 2020, the government directed that MDR not be collected on UPI and RuPay debit-card transactions. That earlier policy does not by itself establish the precise terms of the 2026 framework. RBI payment-systems report
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