You must have heard about “UPI transaction charges” in the past few months and panicked. If you are not a merchant and just a customer, you don’t pay any fees, and UPI will be free for you.
Under the new UPI rules, standard Person-to-Person (P2P) money transfers and merchant payments up to ₹2,000 remain 100% free for consumers. This rule will be effective from October 15, 2026. A 0.4% Merchant Discount Rate (MDR) will apply only to eligible Person-to-Merchant (P2M) transactions above ₹2,000.
(Explaining consumer zero-charge protection, 0.4% merchant MDR threshold for P2M payments above ₹2,000, ₹300 fee cap for ₹75,000+ payments, and zero charges on P2P transfers).
The National Payments Corporation of India (NPCI) has updated the financial settlement framework for Unified Payments Interface (UPI) transactions. The new rules and charges will take effect from 15 October, 2026.
Here is all you need to know about it -
Why is it called a "Merchant Discount Rate" when it is actually a fee?
Decades ago, when customers purchased goods worth ₹1,000 at a retail store using a credit voucher or electronic card, the shopkeeper could not collect physical cash immediately. The acquiring bank would pay, say for example, ₹996 to the shopkeeper, and collect the total ₹1,000 from the buyer’s bank later.
The difference, ₹4 in this case, was known as the “discount rate”. This amount was used by banks to handle transaction costs, network security, payment hardware, and fraud risk.
This is why the payment processing charge is officially termed as a "Merchant Discount Rate" on the seller's gross settlement rather than a separate surcharge added to the customer's bill.
Under NPCI rules, merchants cannot charge this extra amount from the customers for paying via UPI. If the merchant attempts to charge extra, you can report the invoice directly to your bank.
Here is a gist of the different fees for transactions -
|
Type of Payment |
Transaction Purpose |
MDR Fee Rate |
Consumer Charge |
|---|---|---|---|
|
Person-to-Person (P2P) |
Transfers between friends, family, or personal bank accounts. |
0% (Free) |
₹0 (Free) |
|
Merchant Payment up to ₹2,000 |
Grocery, retail, and everyday small-ticket QR code payments. |
0% (Free) |
₹0 (Free) |
|
Small Merchant (P2PM) |
Neighborhood shopkeepers receiving up to ₹1 Lakh/month in collections. |
0% (Free) |
₹0 (Free) |
|
Commercial Merchant (P2M > ₹2,000) |
Large retail outlets, supermarkets, and major online checkout payments over ₹2,000. |
0.4% (Capped at ₹300) |
₹0 (Free) |
|
Essential Public Utilities and Services |
Indian Railways, fuel stations (petrol, diesel, CNG), electricity bills, water utilities, telecom bills, and agricultural input purchases. |
0% up to ₹2,000. Flat ₹5 per transaction if above ₹2,000. |
₹0 (Free) |
|
Capital Market Investments |
Mutual fund SIPs, stock market brokerages, securities purchases, and demat transfers. |
0% for SIPs. 0.02% per transaction if above ₹2,000 (Capped at ₹300). |
₹0 (Free) |
The updated UPI guidelines will make sure that everyday digital payments remain fast, secure, and 100% free for Indian consumers. As a customer, you do not have to incur any charges on making UPI payments using QR codes. Know your rights and use digital payments confidently.
Looking for quick working capital or personal funds to expand your retail counter or handle emergency expenses? Download the Moneyview App or visit the website to check your loan eligibility in just 2 minutes.
There is no limit on the number of transactions you can do in a day. You just cannot spend more than ₹1 Lakh in a day through UPI.
According to the new rule, merchants will have to pay the newly introduced Merchant Discount Rate (MDR) of 0.4% (capped at ₹300) for transactions above ₹2,000.
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