UPI MDR Charges 2026: What Merchants Will Pay, Who Is Exempt and When It Starts

Status on 20 October 2026: announced, deferred, no start date yet

NPCI announced the new UPI MDR in operating circular NPCI/UPI/OC-237/2026-27, dated 15 September 2026, with an effective date of 15 October 2026. NPCI shares the circular itself only with member banks and payment providers, so it also published a public FAQ the same day and a Hindi version later in September.

On 13 October 2026, two days before the start date, NPCI's UPI and Services Steering Committee decided that, keeping the festive season in mind, the MDR would be implemented immediately after Diwali, on a date to be notified separately. NPCI's FAQ, updated on 15 October 2026, says the same. We checked NPCI's circulars and press releases again on 20 October 2026 and found no new start date.

Many pages that rank for UPI charges still say the MDR went live on 15 October 2026. That is not correct. Until NPCI notifies a date and your bank or payment provider confirms it, the new 0.4% and ₹5 charges are not being deducted. We will update this guide as soon as a date is announced.

UPI MDR rates at a glance

• Up to ₹2,000 per payment: no MDR, for every merchant. NPCI says these payments make up more than 95% of person-to-merchant (P2M) UPI volume.
• Above ₹2,000: 0.4% of the payment amount.
• ₹75,000 and above: capped at ₹300 per payment, so a ₹1 lakh or a ₹5 lakh payment costs ₹300.
• Railways, telecom, insurance and fuel, plus other notified categories: a flat ₹5 per payment above ₹2,000, whatever the amount. NPCI's FAQ also places utility bills such as electricity, water and piped gas under this ₹5 rate.
• Capital markets (mutual funds, stockbrokers, securities dealers and investment platforms): 0.02%, capped at ₹300.
• Education fees: payments up to ₹2,000 are free. Above that, NPCI says flat-fee or capped rates apply but has not published the number.
• Small merchants in the P2PM category receiving up to ₹1 lakh a month through UPI QR: no MDR, even on single payments above ₹2,000.
• Credit-linked UPI (RuPay credit cards on UPI and pre-sanctioned bank credit lines): outside this framework. It follows credit card and credit product rules.
• UPI AutoPay and mandates: no prescribed MDR.

The MDR is charged to the merchant by its acquiring bank or payment provider. Customers pay nothing extra, transfers between people (P2P) stay free, and NPCI says UPI apps must not add platform fees.

Worked examples: MDR on a single payment

The table shows the MDR on one payment under each rate. Amounts are before GST and assume your bank or provider applies the NPCI rates as published.

The rate applies to each payment on its own, not to your daily total. A ₹2,000 payment pays nothing, while a ₹2,001 payment pays 0.4% on the full amount, about ₹8. Between ₹2,000 and ₹75,000 the charge rises steadily with the amount, and from ₹75,000 it stays at ₹300.

MDR is a fee for a banking service, so expect 18% GST on top of it, as with card MDR. NPCI's FAQ does not cover GST, so confirm it on your bank's invoice or settlement statement.

A month of UPI sales: worked example

Take a hardware shop on a regular merchant account that collects ₹6 lakh a month through UPI:

• 1,800 payments of up to ₹2,000, totalling ₹3,60,000: MDR ₹0.
• 50 payments between ₹2,001 and ₹74,999, totalling ₹1,60,000: 0.4% = ₹640.
• 1 payment of ₹80,000: capped at ₹300.
• Total MDR: ₹940. GST at 18%: ₹169.20. Total cost: ₹1,109.20, or about 0.18% of the month's UPI sales.

The same ₹6 lakh taken on credit cards at 1.5% to 2.5%, the range NPCI quotes, would cost ₹9,000 to ₹15,000 before GST. UPI stays the cheapest digital way to get paid, and for shops that mostly take small payments the new MDR changes little. Shops that take many large UPI payments, such as electronics, furniture, jewellery and wholesale traders, will feel it most. Run your own numbers in the ZYRO MDR calculator.

Small merchants: the ₹1 lakh P2PM exemption

P2PM (person-to-person-merchant) is NPCI's category for small vendors who receive UPI payments through a QR code directly into their own bank account, without full merchant onboarding. Street vendors, tea stalls, small kirana shops and home businesses usually fall here.

• P2PM merchants receiving up to ₹1 lakh a month through UPI QR pay no MDR, including on single payments above ₹2,000.
• GST registration is not needed to qualify. Eligibility depends on monthly collections and how your bank has categorised your account.
• Banks track inward UPI credits. If you receive more than ₹1 lakh a month for 3 months in a row, you are moved to the regular P2M category, where the 0.4% or ₹5 rate applies above ₹2,000.
• Existing QR codes and soundboxes keep working. NPCI says you do not need to replace, re-register or alter them.

Your bank or payment provider decides whether you are P2PM or P2M. If you are unsure, ask them which category your QR is on and what monthly limit they apply.

What is outside the UPI MDR

• Customers: NPCI says consumers pay nothing for UPI payments, at any amount, and there are no monthly quotas on free UPI use.
• Person-to-person transfers, including transfers between your own accounts.
• Credit-linked UPI: RuPay credit cards linked to UPI and pre-sanctioned bank credit lines are not covered by this MDR. They follow separate credit card and credit product rules, which can carry their own merchant charges, so ask your provider for those rates.
• UPI AutoPay and mandates: NPCI says recurring payments set up as UPI mandates, such as utility bills, subscriptions and SIPs, carry no prescribed MDR.

What to do before the MDR starts

• Ask your bank or payment provider which category your UPI QR is on (P2PM or P2M) and which merchant category code (MCC) it uses. The MCC decides whether you pay 0.4%, the flat ₹5 or the capital-market rate.
• If your MCC looks wrong, raise it with your acquirer. NPCI has issued a separate circular, OC 239, on resolving MCC misclassification disputes.
• Open last month's UPI statement and count the payments above ₹2,000. That share drives your cost.
• Do not add a UPI surcharge to the customer's bill. NPCI's FAQ says merchants cannot pass the MDR on to customers.
• Plan for it the way you plan for card MDR: as a small cost of doing business, built into your prices.
• After the start date, check your settlement statement to confirm that the MDR and GST deducted match the rates above.
• Compare UPI and card costs in the MDR calculator, and read what MDR is and how it is charged for card rates.

UPI MDR vs card MDR

NPCI's FAQ puts typical credit card MDR at 1.5% to 2.5% and debit card MDR at up to 0.90%. At 0.4% with a ₹300 cap, UPI above ₹2,000 still costs a fraction of a card payment, and UPI up to ₹2,000 carries no MDR at all.

• ₹10,000 by UPI (regular merchant): ₹40.
• ₹10,000 by debit card at up to 0.90%: up to ₹90. RuPay debit cards carry zero MDR.
• ₹10,000 by credit card at 1.5% to 2.5%: ₹150 to ₹250.
• ₹1 lakh by UPI: ₹300 (the cap). By credit card at 1.5% to 2.5%: ₹1,500 to ₹2,500.

For a shop, the practical answer stays the same: keep the UPI QR and a soundbox next to the card machine and let customers choose UPI.

Why NPCI is bringing in UPI MDR

NPCI says the MDR will be shared only within the UPI system, to pay for infrastructure, fraud prevention, cybersecurity and customer service, and that running UPI costs the industry about ₹20,000 crore a year. Government incentives have covered part of this so far, but NPCI calls them short-term bridge funding.

Part of the MDR will go into a dedicated fund for small merchants. It will support UPI acceptance in Tier 3 to 6 centres, the North East, Jammu and Kashmir and Ladakh, and schemes such as PM SVANidhi and PM Vishwakarma. NPCI says the fund's framework will be finalised with the RBI within three months.

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