MDR on UPI: How are charges calculated per transaction?

The NCPI circular states that the new charge would be applicable only for person-to-merchant UPI transactions. The National Payments Corporation of India (NCPI) has introduced a Merchant Discount Rate (MDR) of 0.4% that merchants will have to pay to banks and payment processors on UPI transactions over ₹2,000. The NCPI circular, issued on September 15, 2026, stipulated that the new charge would be applicable only for person-to-merchant UPI transactions and will have no impact on small-value UPI transactions up to ₹2,000.The circular also stated that small merchants receiving up to ₹1 lakh per month via UPI QR codes, under the Person-to-Person Merchant (P2PM) classification, will not have to pay MDR on any UPI transactions that they receive. However, transactions pertaining to certain essential sectors, such as railways, telecom and fuel, will attract a flat MDR of ₹5 per transaction for payments above ₹2,000 rather than a percentage. For transactions of ₹75,000 and above, MDR will be capped at ₹300 per transaction.How is MDR calculated for UPI transactionsTransaction to merchantsMDR charges applicableMDR charges to be paid by merchants₹2,000NA0₹3,0000.4%₹12₹50,0000.4%₹200₹75,000 and aboveFixed ₹300₹300Above ₹2,000 for railway, telecom and fuel servicesFlat ₹5 ₹5For UPI transactions of ₹2,000 and below, there will not be any MDR charges. For payment of ₹3,000, the MDR of 0.4% will be applicable that will lead to merchants paying ₹12, while ₹50,000 transaction will lead to a fee of ₹200. For all transactions of 75,000 and above, the MDR charge will be capped at ₹300.According to the Ministry of Finance, only 4% of merchant transactions will attract the charge for payments above ₹2,000.Is MDR applicable for UPI transactions between friends and family?No, the MDR fee will not be applicable for person-to-person UPI transactions that will remain free of cost, irrespective of the transaction value. Zero charges will apply when you transfer money to family members or friends.Will the consumers be charged?No, consumers will not be charged for UPI services, as per the circular. Ordinary consumers can continue to make transactions free-of-cost using UPI as they have been doing till now.When will the new MDR charges come into effect?The new MDR structure will be effective from October 15, 2026. Published - September 16, 2026 01:30 pm IST