On 15 September 2026 NPCI published FAQs on a new Merchant Discount Rate for some UPI person-to-merchant payments. A gazette dated 14 September also locked in that UPI and RuPay debit payments up to ₹2,000 stay free, and person-to-person transfers stay free. The operational start date for the new merchant fee is 15 October 2026.
This is not “UPI is no longer free for everyone.” It is a narrow fee on larger shop payments, paid by the merchant, not a tax on sending money to family.
The rule in one paragraph
Eligible P2M UPI transactions above ₹2,000 attract 0.4% MDR. For a ₹10,000 bill that is ₹40. For transactions of ₹75,000 and above, MDR is capped at ₹300. Everyday payments at kiranas, autos, and small QR codes mostly stay at zero because they are under ₹2,000 or sit in the small-merchant exemption.
Who is exempt
- All person-to-person UPI (splitting rent, sending to a relative).
- P2M payments of ₹2,000 or less, including RuPay debit at that size.
- Small merchants classified as P2PM who receive up to ₹1 lakh a month via UPI QR — no MDR on any of those inflows, NPCI said.
Finance ministry notes that P2P is about 70% of UPI value, and NPCI estimates only about 4% of merchant transactions will sit in the charged bucket.
Special categories
Railways, telecom, insurance, fuel, and public utilities (electricity, water, piped gas) above ₹2,000 use a flat ₹5 MDR instead of 0.4%, so a large fuel or premium bill does not explode costs. Capital-market payments use a much smaller 0.02% rate, still capped at ₹300. Confirm the latest circulars before you change your books — NPCI and RBI remain the source of truth, not WhatsApp forwards.
Can shops add the fee on the bill?
No. Official FAQs say merchants should not pass MDR to the customer as a surcharge, and apps should not add a platform fee on these UPI legs. If a cashier asks you to “pay extra for UPI,” that is a shop policy fight, not the notified design.
Impact: a mid-size retailer
Take an electronics store where the average ticket is ₹8,500 and 60% of those tickets are UPI. On 100 such bills, MDR is 100 × 0.4% × 8,500 = ₹3,400. That is real, but still far below typical credit-card MDR of 1.5–2.5%. The business decision is whether to keep promoting UPI for big tickets or steer some of them to cheaper settlement — not to panic and print “no UPI above ₹2,000.”
Impact: a kirana or salon
If almost every scan is ₹200–₹1,500, nothing changes on 15 October. If you are still under the ₹1 lakh/month QR small-merchant line, you stay exempt even on a rare ₹5,000 bill. Watch classification: growing past that monthly UPI QR threshold is when the 0.4% starts to matter.
Impact: households
Paying a friend remains free. Grocery under ₹2,000 remains free. A ₹25,000 appliance on UPI may cost the seller ₹100. Your bank statement will not show a new “UPI tax” line for P2P. What you might see later is slightly higher prices if large merchants bake MDR into MRP — that is a margin choice, not a government charge on the payer.
What operators should do before 15 October
- Ask your acquiring bank or aggregator how they will show MDR on settlements.
- Split last 90 days of UPI inflows into ≤₹2,000 vs above — that is your exposed mix.
- Do not train staff to surcharge customers; train them to know which QR is small-merchant vs standard P2M.
- Model 0.4% on the high-ticket slice only, with the ₹300 cap, not 0.4% on all UPI.
FAQ
Will PhonePe / GPay / BHIM start charging me to send money?
Not under this MDR for P2P. Sending to another person stays free.
Are AutoPay SIPs charged?
NPCI FAQs say this MDR is about selected P2M merchant acquiring, not a blanket fee on every mandate. Read your app and bank notice for Autopay categories.
Where do I verify rumours?
NPCI FAQs, RBI, Ministry of Finance / PIB — not screenshots.
More India operator notes on the Wiserdusk Blog.