New Delhi, September 15, 2026 (Yes Punjab News)
The new Unified Payments Interface (UPI) framework will leave person-to-person (P2P) transactions completely free, while introducing a limited Merchant Discount Rate (MDR) on specified merchant payments above Rs 2,000, according to an explainer issued by the Finance Ministry on Tuesday.
Here is what the new framework means for consumers and merchants:
P2P Payments Remain Free
There will be no change in person-to-person UPI transactions. Individuals can continue to transfer money free of charge, irrespective of the amount.
Payments to merchants of up to Rs 2,000 will also remain free. Transactions covered under the zero-MDR framework for small merchants will continue to attract no MDR. As a result, approximately 96 per cent of all P2M transactions will remain unaffected.
When Will MDR Apply?
MDR will apply only to specified merchant transactions above Rs 2,000.
A nominal MDR of 0.4 per cent will apply to eligible P2M transactions above this threshold. For transactions of Rs 75,000 and above, the MDR will be capped at Rs 300 per transaction.
The charge will be distributed among participants in the payment ecosystem, including banks, payment service providers and UPI application providers.
Special Rates for Essential Sectors
Transactions above Rs 2,000 in essential and thin-margin sectors such as railways, telecommunications, insurance, fuel and agricultural inputs will attract a flat MDR of Rs 5 per transaction.
Payments related to mutual funds, securities, stockbrokers and dealers will attract an MDR of 0.02 per cent, capped at Rs 300 per transaction.
Will Customers Pay MDR?
The Finance Ministry clarified that MDR is a charge within the merchant payment ecosystem and is neither a tax nor a charge collected by the government or the National Payments Corporation of India (NPCI).
Banks have been advised to ensure merchants do not pass MDR costs on to customers. UPI application providers will also be prohibited from imposing platform fees or hidden charges.
Individuals will continue to have unlimited free UPI usage, with no monthly quotas, volume restrictions or tiered caps on free transactions.
What About Daily UPI Limits?
Daily transaction limits prescribed by banks and NPCI will continue to apply. These generally range from Rs 1 lakh to Rs 5 lakh, depending on the transaction category.
The Finance Ministry said these limits are security and risk-management safeguards and should not be confused with charging thresholds.
Support for Small Merchants
The new framework also provides for a dedicated fund to promote UPI adoption among small merchants. An amount equivalent to 5 per cent of total MDR collections will be contributed to the fund.
The fund will support wider UPI acceptance, sustained usage and greater participation of small businesses in India’s digital payments ecosystem.
Revenue generated through larger merchant transactions will also support banks, payment service providers and UPI application providers in expanding and improving payment infrastructure, including in rural and semi-urban areas.
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