New Delhi: The National Payments Corporation of India (NPCI) announced on Tuesday a revised Merchant Discount Rate (MDR) framework for select Unified Payments Interface (UPI) transactions, introducing fees for specific merchant payments exceeding 2,000 rupees while keeping small vendors and low-value transfers at zero MDR.

The updated guidelines will take effect on 15 October 2026, with UPI usage remaining free of charge for retail consumers. Over 95 per cent of low-value UPI Person-to-Merchant (P2M) payments, covering transactions up to 2,000 rupees, will remain exempt from MDR charges.

Under the revised rules, a 0.4 per cent MDR will be levied on designated P2M UPI transactions exceeding 2,000 rupees, capped at a maximum of 300 rupees per transaction. Additionally, a flat fee of 5 rupees per transaction will apply to payments over 2,000 rupees across chosen merchant sectors, such as railways, telecommunications, insurance, and fuel.

Person-to-Person (P2P) transfers will remain entirely free, and P2M transactions up to 2,000 rupees will stay excluded from the MDR schedule, ensuring consumers face no transaction fees for using UPI.

Small vendors operating under the Person-to-Person Merchant (P2PM) scheme will retain zero MDR status. This classification applies to small traders receiving up to 1 lakh rupees monthly via UPI QR code scans directly into bank accounts, promoting digital transaction adoption within unorganised retail markets.

The framework also outlines the creation of a dedicated fund to drive UPI adoption among small businesses, focusing on existing vendor networks as well as Tier-3 and smaller regional markets. The program aims to enhance digital infrastructure and incentivise broader UPI usage among small vendors.

Under the new policy, revenue generated from MDR on higher-value transfers will be distributed across key UPI ecosystem participants. The system aims to encourage ongoing capital investment in cybersecurity, system resilience, payment infrastructure, and financial technology innovation, while driving wider UPI adoption among new merchants and consumers.

IANS