UPI transactions above Rs 2,000 to attract 0.4% MDR; check key details
TrendsFact Editor
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UPI transactions above Rs 2,000 to attract 0.4% MDR; check key details
The Reserve Bank of India (RBI) issued a circular on 12 September 2026 in Mumbai, announcing a new Merchant Discount Rate (MDR) for Unified Payments Interface (UPI) payments that exceed Rs 2,000. Effective 1 October 2026, the MDR will be set at 0.4 percent and will be borne by the merchant receiving the payment, according to the RBI’s official notification and reporting by NDTV and Reuters.
The change follows a series of consultations between the RBI, the National Payments Corporation of India (NPCI), and industry bodies aimed at standardising fees for higher‑value digital transactions. NPCI has confirmed that the 0.4 % rate applies uniformly across all UPI‑enabled banks and payment service providers, replacing the earlier provisional range of 0.4 %–0.6 % that was under review.
The MDR does not apply to peer‑to‑peer (P2P) transfers between individuals, nor to government‑to‑citizen payments, utility bill settlements, or subscription services that fall under the “essential services” exemption outlined in the RBI’s guidelines. It is limited to merchant‑driven transactions such as retail purchases, restaurant bills, and e‑commerce orders where the amount exceeds Rs 2,000.
Industry analysts cited by Reuters expect the modest fee to help cover the rising operational costs of processing larger UPI payments while preserving the platform’s low‑cost appeal for smaller transactions. Small merchants have expressed concern about the added expense, prompting the RBI to promise a phased implementation and a grievance redressal mechanism.
The RBI’s move underscores its commitment to a sustainable digital payments ecosystem, balancing affordability for consumers with viable revenue streams for merchants and payment processors.
