The government has ruled out any rethink or rollback of the proposed Merchant Discount Rate (MDR) on certain UPI payments above Rs 2,000.
A top government official said on Wednesday that a decision had already been taken and there was “no question” of reversing it, reported PTI. The new MDR framework will come into effect from October 15, 2026.
The move means that while consumers will continue to use UPI without paying a transaction fee, merchants will have to bear a charge on certain high-value payments.
Under the new MDR framework, merchants will be charged 0.4% on direct UPI payments above Rs 2,000.
The fee will be paid by the merchant to the acquiring bank. There will also be a cap of Rs 300 for transactions of Rs 75,000 and above.
For example, on a UPI payment of Rs 10,000, the standard MDR at 0.4% would work out to Rs 40. On a payment of Rs 75,000, it would be Rs 300. For transactions above Rs 75,000, the charge will remain capped at Rs 300.
The government sources said the decision has been taken in the larger interest of the UPI ecosystem and to strengthen its safety and security.
The standard 0.4% MDR will not apply to every merchant category.
Under the new framework, . This means merchants in these categories will pay Rs 5 even when the UPI payment is much higher than Rs 2,000.
The categories covered include railways, telecom services, insurance and fuel, among others.
So, a merchant accepting an eligible UPI payment above Rs 2,000 in these categories will pay Rs 5 instead of 0.4% of the transaction value.
Petrol pumps to pay flat Rs 5
Fuel purchases are among the transactions that will get the concessional treatment.
For instance, if a customer makes a UPI payment above Rs 2,000 at a petrol pump, the merchant will pay a flat Rs 5 MDR, rather than the standard 0.4%.
This is particularly relevant for higher-value fuel payments, where a percentage-based charge could otherwise be higher.
Utility bill payments also get Rs 5 MDR
Certain government utility payments will also be covered by the flat-rate structure.
UPI payments above Rs 2,000 for services such as electricity, municipal water and piped natural gas will attract a flat MDR of Rs 5 instead of 0.4%.
This means consumers making these payments will not have to pay the MDR directly. The charge will apply on the merchant side.
For UPI users, there is no change in the direct cost of making a payment.
The new MDR is a merchant-side charge, meaning consumers will not be asked to pay 0.4% when they make an eligible UPI payment above Rs 2,000.
The government has also made it clear that the decision will go ahead from October 15, despite questions over whether the proposed charge could be reconsidered.
The move is aimed at supporting the wider UPI ecosystem, with the government pointing to the need to strengthen its safety, security and infrastructure as digital payments continue to grow.