India introduces 0.4% fee on large UPI merchant payments

India's National Payments Corporation of India (NPCI) has introduced a 0.4% Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) person-to-merchant transactions exceeding ₹2,000, effective October 15, 2026. The charge applies only to merchants, not consumers, and exempts small vendors, person-to-person transfers, and low-value payments. The new framework marks a significant shift for a digital payments system that has been free for merchants to accept since 2020. According to NPCI and government statements, the MDR will be levied on person-to-merchant (P2M) transactions above ₹2,000, with the fee shared among ecosystem partners including banks and app providers. For high-value transactions of ₹75,000 and above, the MDR is capped at ₹300 per transaction. Consumers will continue to use UPI without paying any transaction fee. The government has advised banks to ensure merchants do not pass the MDR charges to customers for UPI payments. NPCI stated that the 0.4% charge is low enough for businesses to absorb. Several exemptions and special rates are included in the framework. All person-to-person (P2P) UPI transfers remain free, regardless of value.