Finance Ministry said on Wednesday that a 0.4% merchant discount rate will apply to UPI payments above Rs 2,000 from Oct 15, 2026, and that the move is independent of any foreign influence.
The rate, capped at Rs 300 for transactions exceeding Rs 75,000, will be borne by merchants, not consumers. Essential services like railways, telecom, fuel and insurance will pay a flat Rs 5 per transaction, while capital‑market transactions get a lower 0.02% fee, also capped at Rs 300. Small merchants collecting up to Rs 1 lakh a month via UPI QR codes will remain exempt, shielding roughly 96% of all merchant transactions.
UPI, launched in 2016, processed 24.5 billion transactions in August 2026, a steep rise from 1.78 million in FY2016‑17. The 0.4% fee is not a tax; it is distributed among banks and payment‑app providers to fund infrastructure resilience, cybersecurity, fraud prevention and customer service. Five percent of the collections will feed a dedicated fund to expand UPI acceptance among small merchants.
The Finance Ministry’s statement came after Congress and other opposition parties alleged that the government had succumbed to U.S. pressure. “Some claims suggest the change is due to foreign influence. This is false,” the ministry said on X, underscoring that India’s UPI policy decisions are made independently. A senior government official confirmed that there was no question of reconsidering the MDR.
Merchants across India will need to adjust their payment systems to accommodate the new fee. The Ministry has urged banks to inform their merchant partners, and the National Payments Corporation of India (NPCI) will oversee the rollout. The next phase will see the fee take effect on Oct 15, with the first batch of collections processed by the end of the month.