MDR On UPI Is Here, But Who Foots The Bill?

by · Inc42

SUMMARY

  • UPI will introduce a 0.4% MDR on eligible P2M transactions above ₹2,000 from October 15, 2026, ending its six-year zero-MDR regime.
  • The bigger shift is the ₹1 Lakh/month UPI receipt threshold for “small” merchants, potentially bringing many more small and mid-sized sellers into the MDR net.
  • The new fee could affect merchant margins, consumer pricing and fintech monetisation, while some businesses expect limited financial impact but higher operational complexity.
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UPI is one of the cheapest ways for Indian merchants to collect digital payments. Now, the economics of India’s biggest digital payment rail is set to change from October 15. 

After this date, under the new merchant discount rate (MDR) framework, banks and payment providers will charge 0.4% on UPI person-to-merchant (P2M) transactions above ₹2,000, capped at ₹300 for transactions of ₹75,000 and above. 

The new regime exempts merchants receiving up to ₹1 Lakh a month through UPI QR codes.

Earlier, merchants with annual turnover between ₹1 Cr and ₹1.5 Cr  according to media reports were expected  to fall under the safe-harbour threshold.