RBI announced on Tuesday that it would levy a 0.4% merchant discount rate (MDR) on person‑to‑merchant UPI payments exceeding ₹2,000, with the rule taking effect on 15 October 2026—an action that marks the first formal charge in the UPI ecosystem.
The new MDR caps at ₹300 for transactions of ₹75,000 and above, while all UPI payments up to ₹2,000 remain free for both merchants and consumers. The policy stipulates that merchants will absorb the fee, whereas customers will not see any surcharge on their UPI wallets.
UPI currently processes more than 95 % of P2M transactions below ₹2,000, which is why the RBI says the change will barely touch everyday cash‑less commerce. By only targeting larger sales, the RBI aims to generate a recurring revenue stream without disrupting the free‑payment model that has driven UPI’s explosive growth.
Finance Minister Nirmala Sitharaman echoed the RBI’s stance, stating that the MDR is a merchant‑side charge and will not affect consumers. Yet, small shop owners in Delhi warn that even a 0.4 % cut could squeeze thin margins, especially when the cap on high‑value sales is still in place.
The National Payments Corporation of India has given banks, fintechs and aggregators a four‑month window to update their billing and settlement systems. The RBI will monitor implementation post‑October and may adjust the fee structure if merchant uptake stalls.
As the cut‑over looms, merchants across the country are scrambling to re‑price their goods and recalibrate their POS software, hoping the new revenue model will support future investment in UPI infrastructure.