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# India Introduces Fees on Larger UPI Merchant Payments
- URL: https://www.theglobalvoice.com/india-introduces-fees-on-larger-upi-merchant-payments/
- Published: 2026-09-16T05:45:50.000Z
- Updated: 2026-09-16T05:45:50.000Z
- Description: From October 15, selected UPI merchant payments above ₹2,000 will attract a 0.4% MDR, capped at ₹300. Consumers and person-to-person transfers remain free, while the government says 96% of merchant transactions will still face no charge.
- Author: TGV Desk
- Tags: India, that is Bharat, The Day So Far, Live Wire, markets, has-audio

India is introducing charges on larger UPI merchant transactions, ending more than six years in which most digital payments through the country’s dominant payment network were processed without a merchant discount rate.

From October 15, selected person-to-merchant UPI payments above ₹2,000 will attract an MDR of 0.4%, according to the National Payments Corporation of India. The fee will be paid by merchants, not consumers, and will be capped at ₹300 per transaction. For transactions of ₹75,000 or more, the merchant will therefore still pay no more than ₹300\. Person-to-person transfers will remain completely free regardless of value.

The government has also tried to limit the impact on smaller businesses. Merchants receiving less than ₹1 lakh a month through QR-code UPI payments will remain exempt, while rural and semi-urban QR payments will continue to be free. Special categories such as railways, fuel, utilities, telecom, insurance, agriculture, tax payments and credit-card dues will attract a flat ₹5 fee rather than the full 0.4% rate. Capital-market transactions will be charged at 0.02%, capped at ₹300\. The shift reflects a problem created by UPI’s own success.

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UPI processed around 24 billion transactions worth about $311 billion in August alone, making it the backbone of everyday digital payments in India. But the zero-MDR model meant banks, payment apps and infrastructure providers were processing enormous volumes with limited direct revenue from transactions. The government has argued that the new framework is necessary to fund cybersecurity, infrastructure upgrades and continued expansion of the network.

Officials are also insisting that consumers should not see direct charges. The Finance Ministry has said merchants should not pass the MDR on to customers, while the new framework is designed so that roughly 96% of person-to-merchant UPI transactions remain unaffected. Payments below ₹2,000 continue to be free, which covers the vast majority of everyday purchases.

The financial industry has welcomed the move. Shares of Paytm, One MobiKwik and Yes Bank rose after the announcement as investors anticipated a new revenue stream for banks and payment companies. Most of the MDR collected will be distributed among participants in the UPI ecosystem rather than going to the government or NPCI.

But the change will still be closely watched by merchants operating on thin margins. Large retailers may be able to absorb a 0.4% fee relatively easily, while smaller businesses just above the exemption threshold could feel the cost more sharply. Some industry executives have already warned that businesses may eventually look for indirect ways to recover those charges.

The bigger significance is that India is beginning to move UPI from a growth-at-all-costs model toward a more commercial one.