NPCI has said the merchant discount rate on select UPI person-to-merchant transactions will be implemented post Diwali. Its FAQ document of September 2026 had set the start of the finalised framework at 15 October 2026. That document fixes the rate at 0.4 percent on person-to-merchant transactions above Rs 2,000. For transactions of Rs 75,000 and above, the charge is capped at Rs 300 per transaction.
Transactions up to Rs 2,000 carry no charge. NPCI states that those transactions account for more than 95 percent of UPI person-to-merchant volume. Railways, telecom services, insurance and fuel pay a flat Rs 5 per transaction above Rs 2,000 instead of the percentage rate. NPCI's worked example puts the fee on a Rs 3,000 purchase at Rs 12.
Person-to-person transfers stay free of cost for both payer and beneficiary. UPI applications are barred from charging a platform fee on any UPI payment. Recurring UPI Mandates and AutoPay instructions carry no prescribed MDR charge. Small merchants in the P2PM category, which covers vendors receiving up to Rs 1 lakh a month through UPI QR codes, continue at zero MDR. Acquiring banks move a P2PM merchant into the P2M category once inward UPI credits exceed Rs 1 lakh a month for three consecutive months.
NPCI cites industry estimates of around Rs 20,000 crore a year to maintain UPI operations, server bandwidth, fraud prevention systems and bank technical support. UPI processed 2,451 crore transactions worth Rs 29.82 lakh crore in August 2026. A dedicated fund for small merchants is to be finalised in consultation with the Reserve Bank of India within three months.
PYMNTS reported on 18 October 2026 that a Local Circles survey found 83 percent of merchants unwilling to bear the additional cost. NPCI's September 2026 FAQ said the 15 October timeline gave acquiring banks, payment aggregators, fintech applications and corporate accounting platforms adequate lead time to update their software engines and billing systems.