INDIA 🔗 Part of: Indian Government Actions and Policy Developments (23) · 16 Sep 2026 · 04:47 GMT ·2 min read

NPCI Sets 0.4% Merchant Discount Rate for UPI Payments Above ₹2,000, Effective October 15

The National Payments Corporation of India (NPCI) announced a 0.4% Merchant Discount Rate (MDR) on person-to-merchant (P2M) transactions capped at ₹300 on UPI transactions exceeding ₹2,000.

NEUTRALITY 85 · BALANCED· 5 sources

The Times of India

The National Payments Corporation of India (NPCI) announced a 0.4% Merchant Discount Rate (MDR) on person-to-merchant (P2M) transactions capped at ₹300 on UPI transactions exceeding ₹2,000. This fee structure begins on October 15, 2026. The policy targets high-value digital payments to manage transaction costs within the UPI ecosystem. Merchants and payment service providers must adjust their systems before the deadline. The fee applies to 4% of merchant transactions above ₹2,000. Peer-to-peer transfers and smaller merchant payments remain free.

Context

The National Payments Corporation of India (NPCI) operated the Unified Payments Interface (UPI) under a zero-fee model for years. This structure supported rapid growth in digital payments across India. The NPCI introduced a 0.4% fee for specific high-value merchant transactions.

Supportive perspectives

The National Payments Corporation of India (NPCI) introduced this fee to fund the Unified Payments Interface (UPI) infrastructure. The agency applies a 0.4 percent Merchant Discount Rate (MDR), a fee paid by merchants for processing, to transactions exceeding ₹2,000. This charge covers operational costs for high-value digital payments.
The National Payments Corporation of India (NPCI) governs retail payments in India. The organization issued a notification to standardize the fee structure. This announcement guides merchants and payment service providers. Implementation begins on October 15, 2026.
The policy introduces a fee on large transactions to balance market activity. This revenue funds infrastructure for high-value merchant payments. The investment helps the system manage rising transaction volumes.
The Reserve Bank of India and the National Payments Corporation of India (NPCI) state that these fees fund payment infrastructure without charging ordinary users. Peer-to-peer transfers and 96% of merchant transactions remain free under the current policy.

Critical perspectives

Merchants pay a 0.4% Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions exceeding 2,000 Indian Rupees (INR). This policy replaces a previous zero-fee model. The zero-fee model encouraged widespread merchant adoption of the payment system.
Merchants handling high-value transactions face new financial obligations on October 15, 2026. Some businesses are expected to avoid UPI payments to bypass these requirements.
Merchants might attempt to offset these charges by raising prices. This would increase costs for customers. Some merchants could stop accepting the Unified Payments Interface (UPI) to avoid the fees. A decline in UPI adoption might lead to a return to cash payments.
Critics argue that this move reverses progress toward a cashless economy by encouraging cash-based transactions.