UPI MDR Regime Explained: Here’s What Will Be Charged After Oct 15
by Akshit Pushkarna · Inc42SUMMARY
- UPI will introduce a 0.4% MDR on eligible P2M transactions above ₹2,000 from October 15.
- The move shifts UPI towards a commercial model while keeping consumer payments and small merchants largely protected.
- MDR rates vary by transaction value and sector, with separate rules for small merchants, capital markets and credit-linked UPI.
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India’s ubiquitous UPI payment system is set for a significant change from October 15, with the introduction of a merchant discount rate (MDR) on select transactions.
Under the new framework, merchants will be charged an MDR of 0.4% on person to merchant (P2M) UPI transactions above ₹2,000. The charge will be capped at ₹300 for transactions worth ₹75,000 or more.
The October 15 change does not necessarily make UPI a paid service for consumers. Instead, it introduces a commercial layer on the merchant side. With a 0.4% MDR for regular P2M transactions above ₹2,000 and a ₹300 cap for transactions of ₹75,000 and above.
The framework keeps P2P payments free, protects P2PM merchants from MDR and provides lower flat rates for sectors such as fuel, insurance and utilities.
The broader shift is from an entirely zero-MDR merchant model towards a threshold-based system intended to create a more sustainable financial model for India’s UPI infrastructure.
Payments Council of India’s chairman and AvenuesAI CEO Vishwas Patel believes that the introduction of the charges is a key step to build a viable economic model while keeping UPI free for consumers.