NPCI introduces 0.4% MDR charge on UPI payments above ₹2,000, exempts small merchants, person-to-person transfers
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NPCI Introduces 0.4% MDR Charge on UPI Payments Above ₹2,000, Exempts Small Merchants, Person‑to‑Person Transfers
New Delhi, 15 September 2026 – The National Payments Corporation of India (NPCI) announced on Thursday that a 0.4 per cent merchant discount rate (MDR) will be levied on Unified Payments Interface (UPI) transactions exceeding ₹2,000, a policy shift aimed at sustaining the expanding digital payments ecosystem.
The decision, detailed in an NPCI circular released on its website, takes effect immediately. It applies only to payments above the ₹2,000 threshold; transactions below that amount remain fee‑free. To protect small‑scale traders, merchants with an annual turnover under ₹40 lakh are exempt, as are all person‑to‑person (P2P) transfers, which will continue to be free.
NPCI officials told Reuters that the MDR will be shared equally between the payer’s and payee’s banks, mitigating impact on end users. “The charge reflects the incremental processing costs incurred on higher‑value transactions while preserving the inclusive spirit of UPI,” the spokesperson said.
Industry analysts cited by NDTV expect the move to generate modest revenue for banks without curbing consumer adoption, noting that UPI volumes grew 22 percent year‑on‑year in first half of 2026, according to the Reserve Bank of India’s latest payments data overall.
The Ministry of Finance, in a statement, welcomed the measure as a “balanced pricing framework” for payments. Consumer groups, however, have urged NPCI to monitor the impact on small merchants closely.
The new MDR framework is part of NPCI’s broader effort to revisit pricing structures after stakeholder consultations held in August 2026.
