The Ministry of Finance and the National Payments Corporation of India (NPCI) have released details on applying the merchant discount rate (MDR) charges when using the popular unified payments interface (UPI) system.
The UPI is a QR-code based payment method widely used in India and currently does not have any levy or charge.
Under the MDR framework, payments to merchants will be charged on transactions of more than INR2,000 (USD20), this will not affect person-to-person transactions, which remain free, and customers must not be charged.
For all transactions above INR2,000 to merchants, an MDR charge of 0.4% will be applied. The MDR has been capped at INR300 for transactions above INR75,000. An MDR is already charged on credit and debit card transactions in India. For credit cards, the MDR charge ranges from 1.5%-2.5% and for debit cards, it is 0.9%.
The government said the MDR charge on UPI transactions would not affect consumers, with around 96% of total UPI transactions remaining unaffected.
The MDR charge will not be levied on transactions up to INR2,000 to small merchants with the total received amount in a month up to INR100,000. All charges collected would not be for the government or NPCI, but distributed across the UPI ecosystem for its promotion, expansion and maintaining operations.
This framework was introduced through a gazette notification adding UPI transactions up to INR2,000 and RuPay debit cards to section 10A of the Payment and Settlement Systems Act, 2007.
Section 10A prohibits banks and systems from imposing a charge on electronic modes of payments under section 269SU of Income Tax Act, 1961. This included all transactions through RuPay debit cards and UPI, including those through QR codes. RuPay is an NPCI launched card system network for Indian banks.
With the new MDR framework, charges will become applicable from 15 October 2026.
