Fees, Price Drivers and 2026 Rules
UPI MDR above ₹2,000 (2026): the 0.4% charge, ₹300 cap, ₹5 categories and who is exempt
How NPCI's MDR on select UPI merchant payments above ₹2,000 works, the deferral to after Diwali 2026, P2PM exemption, flat-fee categories and worked examples.
Under the framework set out in the Department of Financial Services/NPCI FAQ of 15 September 2026, merchants will pay an MDR of 0.4% on select person-to-merchant (P2M) UPI payments above ₹2,000, capped at ₹300 per payment for payments of ₹75,000 and above. Notified categories such as railways, telecom, insurance, fuel and utilities pay a flat ₹5 per payment above ₹2,000, and capital-market payments pay 0.02% (cap ₹300). Payments of ₹2,000 or less stay free, P2P transfers stay free, UPI AutoPay mandates carry no prescribed MDR, and small merchants under NPCI's P2PM framework (UPI QR credits up to ₹1 lakh a month) pay nothing. The FAQ named 15 October 2026 as the start date, but on 13 October 2026 NPCI's UPI and Services Steering Committee deferred it to "immediately post Diwali at a date to be notified separately". On 28 October 2026 no new date had been announced. This guide explains how to prepare. It belongs to the fees overview.
The framework at a glance
| Payment | MDR paid by merchant (per the 15 Sept 2026 FAQ) |
|---|---|
| P2M UPI up to ₹2,000 | Nil |
| P2M UPI above ₹2,000, general | 0.4% |
| P2M UPI of ₹75,000 and above | Fixed ₹300 cap |
| Notified categories (railways, telecom, insurance, fuel, utilities and others) above ₹2,000 | Flat ₹5 per payment |
| Capital markets (mutual funds, securities, brokers, investment platforms) | 0.02%, cap ₹300 |
| Education above ₹2,000 | Concessional flat fee or capped rate (details to be set) |
| P2PM small merchants (UPI QR credits up to ₹1 lakh a month) | Zero |
| UPI AutoPay / mandates | No prescribed MDR |
| P2P transfers | Free for both sides |
| RuPay credit card or credit line on UPI | Credit product rules, not this framework |
The legal basis is the narrowed zero-charge notification under section 10A of the Payment and Settlement Systems Act: only UPI payments up to ₹2,000 (and RuPay debit cards) remain charge-free by law. See zero charge on RuPay debit and UPI.
Worked examples
The FAQ itself gives these figures:
| Payment | MDR |
|---|---|
| ₹2,000 | ₹0 |
| ₹3,000 | ₹12 (0.4%) |
| ₹50,000 | ₹200 (0.4%) |
| ₹1,00,000 | ₹300 (cap; 0.4% would be ₹400) |
The cap starts at ₹75,000 because 0.4% of ₹75,000 is exactly ₹300.
Illustrative month for an electronics shop. It takes 400 UPI payments a month:
| Band | Payments | Value | MDR |
|---|---|---|---|
| Up to ₹2,000 | 220 | ₹1,76,000 | ₹0 |
| ₹2,001 to ₹74,999 | 175 | ₹14,00,000 | 0.4% = ₹5,600 |
| ₹75,000 and above | 5 | ₹4,50,000 | 5 × ₹300 = ₹1,500 |
| Total | 400 | ₹20,26,000 | ₹7,100 |
Add 18% GST on the MDR (₹1,278) if charged: about ₹8,378 a month, or 0.41% of UPI receipts. The shop's card payments would cost several times more for the same value. To calculate the ₹2,001–₹74,999 band, use the MDR fee calculator with 0.4%; add the capped payments separately.
Illustrative fuel station. 1,500 UPI payments above ₹2,000 a month, flat ₹5 each: ₹7,500 a month regardless of the value of fuel sold.
Who counts as a P2PM small merchant
The FAQ describes P2PM (person-to-person-merchant) as a category created by NPCI for small vendors who receive payments directly into their own accounts through UPI QR. Key points:
- Zero MDR while inward UPI credits stay within ₹1 lakh a month.
- GST registration is not needed to qualify.
- Acquirers monitor volumes. A merchant whose UPI credits exceed ₹1 lakh a month for three consecutive months is moved to the P2M category, where the 0.4% applies above ₹2,000.
- Existing QR codes and soundboxes keep working; no re-registration is needed.
If your shop is close to ₹1 lakh a month, keep an eye on your inward credits and ask your bank how it will tell you about a change of category.
What merchants may and may not do
- No pass-through. FAQ question 34: merchants "cannot pass on MDR charges to customers while accepting payments through UPI". Customers pay the listed price.
- No platform fees by apps. UPI apps may not charge customers a platform fee on UPI payments.
- Splitting bills into several ₹2,000 payments to avoid MDR is an obvious idea, but acquirers and NPCI can see patterns; it may breach your merchant terms and annoy customers. Do not build your process on it.
- Steering customers to UPI rather than credit cards remains lawful; refusing a card you have agreed to accept may breach your card agreement.
How to prepare before the start date
- Measure your share of UPI payments above ₹2,000 from your dashboard or bank statement.
- Check your category. If your business falls in a ₹5 or 0.02% category, confirm with your acquirer that your merchant category code is right.
- Ask for the rate card showing how the UPI MDR will appear, and whether GST will be added.
- Update your pricing model if margins are thin on high-ticket UPI sales.
- Watch NPCI's press releases for the notified date.
FAQ
Will customers pay anything extra on UPI?
No. The FAQ says consumers will not be charged, and merchants may not pass the MDR to customers.
Is the 0.4% charged on the whole payment or only above ₹2,000?
On the whole payment, for payments above ₹2,000: ₹3,000 attracts ₹12, which is 0.4% of ₹3,000.
Why is it called MDR on "select" transactions?
Because many payments are excluded: up to ₹2,000, P2P, P2PM merchants, AutoPay, and the flat-fee categories.
Where does the money go?
The FAQ says MDR is shared within the UPI ecosystem for infrastructure, security and innovation, and that a fund for small-merchant onboarding is to be set up with the RBI.
Sources
- Department of Financial Services — FAQs on MDR on select UPI (P2M) transactions, 15 September 2026
- NPCI — press release of 13 October 2026 deferring implementation, and later notices
- e-Gazette of India — S.O. 5067(E) of 14 September 2026
- Reserve Bank of India — payment system oversight and complaints
