New Delhi/Alive News: With Diwali over, attention has shifted to the proposed Merchant Discount Rate (MDR) on high-value Unified Payments Interface (UPI) transactions. The National Payments Corporation of India (NPCI) had earlier announced a 0.4% charge on selected UPI payments above ₹2,000. However, the implementation was postponed due to the festive season, and a fresh date is yet to be announced.
Under the proposed framework, the charge will apply to eligible person-to-merchant (P2M) transactions and will be paid by shopkeepers, not customers. For transactions worth ₹75,000 or more, the maximum MDR will be capped at ₹300 per transaction.
How much will merchants pay?
At a rate of 0.4%, a merchant will pay ₹10 on a ₹2,500 transaction, ₹20 on ₹5,000 and ₹40 on ₹10,000. For transactions of ₹75,000 or above, the charge will be limited to ₹300.
However, small merchants receiving up to ₹1 lakh per month through UPI QR codes under the P2PM category will continue to enjoy zero MDR, including on transactions above ₹2,000. Payments of ₹2,000 or less will also remain free of MDR for other merchants.
Special charges for essential services
A flat fee of ₹5 per transaction will apply to eligible payments above ₹2,000 in sectors such as railways, telecommunications, insurance, fuel and agricultural inputs.
Why was the decision postponed?
NPCI had initially planned to introduce the charges from October 15, 2026. However, following concerns from traders and payment companies about the impact on festive-season transactions, the organisation postponed the implementation until after Diwali.
What is MDR?
Merchant Discount Rate (MDR) is a fee paid by businesses to banks and payment service providers for processing digital payments. It helps cover the costs of maintaining payment infrastructure and transaction networks. The charge is borne by merchants rather than customers.
Why are large UPI transactions important?
Payments above ₹2,000 account for a relatively small share of merchant transactions by volume but contribute a much larger share of their total value. According to reported figures, these transactions account for around 67% of the total value of merchant UPI payments.
The government introduced incentive schemes in 2021-22 to encourage digital payments and support small merchants. According to government figures, ₹8,276 crore was provided under the incentive scheme up to 2024-25.
The proposed MDR framework aims to support the financial sustainability of the digital payment system while keeping UPI payments free for individual users.
