India Introduces 0.4% Fee on Large UPI Merchant Payments

India's government and the National Payments Corporation of India (NPCI) have introduced a 0.4% Merchant Discount Rate (MDR) on person-to-merchant UPI transactions exceeding ₹2,000, effective October 15, 2026. The charge applies only to merchants and is intended to fund the long-term sustainability of the UPI digital payments infrastructure. The new framework marks the end of a nearly six-year zero-MDR regime for merchant payments on the platform. Under the rules announced on September 15, 2026, customers will continue to use UPI without paying any transaction fee. The government has explicitly stated that the MDR is a charge within the merchant payment ecosystem and cannot be passed on to consumers. The standard 0.4% MDR will apply to person-to-merchant (P2M) transactions above ₹2,000, with the fee capped at ₹300 for transactions of ₹75,000 and above. For example, a ₹3,000 payment will incur a ₹12 fee for the merchant, while a ₹1 lakh transaction will be capped at ₹300. Several exemptions are built into the framework. All person-to-person (P2P) UPI transfers remain free, regardless of value.