New UPI Payment Charges 2026: What Will Remain Free and What Will Attract MDR?
The new UPI payment charges ensure zero MDR on P2P transfers and transactions up to INR 2,000. It introduces structured rates for larger payments, shields small vendors, and bans hidden fees. Data analysis indicates that only 4 per cent of total merchant transactions will be impacted by the introduction of MDR. Scroll below to know what will remain free and what will attract MDR.
The Central Government and the National Payments Corporation of India (NPCI) have released a comprehensive operational framework for Unified Payments Interface (UPI) transactions, officially confirming that all person-to-person (P2P) transfers and merchant transactions up to INR 2,000 will maintain zero Merchant Discount Rate (MDR) charges.
Following an amendment to the Payment and Settlement Systems (PSS) Act, 2007, which establishes the legal foundation for digital transaction transparency and affordability, the new circular outlines precise fee models, sectoral caps, and consumer protections designed to ensure the long-term financial sustainability of India's digital payment ecosystem. New UPI Transaction Rates 2026: Check Proposed MDR Fees, Caps and Exemptions.
What Remains Completely Free for Users
Under the updated framework, everyday users and small-scale operators are heavily insulated from transactional fees:
- Person-to-Person (P2P) Transfers: All P2P transfers remain entirely free of charge regardless of the transaction value. These transactions constitute 37 per cent of total UPI volume and 70 per cent in value terms, reports PIB.
- Merchant Transactions up to INR 2,000: Person-to-merchant (P2M) payments valued at or below INR 2,000 attract a mandatory zero MDR.
- Small Vendors (P2PM Framework): Micro-merchants receiving up to INR 1 lakh per month via UPI QR codes under the P2PM classification continue to enjoy zero MDR across all transactions.
Data analysis indicates that only 4 per cent of total merchant transactions will be impacted by the introduction of MDR, as the vast majority fall below the INR 2,000 threshold or qualify for small-business exemptions.
Structured MDR Rates for Larger Transactions
For transactions exceeding the INR 2,000 threshold, a structured commercial model has been established to support ecosystem partners, including banks and app providers:
- Standard P2M Payments: Transactions above INR 2,000 attract a nominal MDR of 0.4 per cent, which is shared among participating financial partners. High-value payments of INR 75,000 and above feature a strict cap of INR 300 per transaction.
- Essential Sectors: Essential public services and thin-margin industries - such as railways, telecom, insurance, fuel, and agricultural inputs - apply a flat MDR of INR 5 per transaction for amounts exceeding INR 2,000.
- Capital Markets: Payments toward mutual funds, securities, stockbrokers, and dealers incur a reduced nominal MDR of 0.02 per cent, capped at INR 300 to encourage retail investment.
Safeguards and Ecosystem Growth
The framework explicitly prohibits UPI app providers from levying platform fees or hidden charges on everyday users, while banks have been instructed to ensure merchants do not improperly pass MDR costs onto consumers. Furthermore, 5 per cent of total MDR collections will be dedicated to a specialised infrastructure development fund aimed at accelerating digital adoption in rural and semi-urban regions.
(The above story first appeared on LatestLY on Sep 15, 2026 07:51 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).