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The National Payments Corporation of India announced on 15 September 2026 that a Merchant Discount Rate of 0.4% will apply to eligible person-to-merchant UPI transactions above Rs 2,000 from 15 October 2026.
Person-to-person transfers and all merchant payments up to Rs 2,000 stay free; these small payments are more than 95% of UPI's P2M volume.
The fee is capped at Rs 300 for transactions of Rs 75,000 and above, and merchants receiving up to Rs 1 lakh a month through UPI QR codes are exempt.
Railways, telecom, insurance and fuel pay a flat Rs 5 per transaction above Rs 2,000; capital market payments such as mutual funds and securities pay 0.02%, capped at Rs 300.
NPCI put the annual cost of running UPI at about Rs 20,000 crore, and the 40 basis points are split 40% to issuer banks, 30% to acquirers, 20% to UPI apps and 10% to their bank partners.
| Type of transaction | MDR from 15 October 2026 | Cap |
|---|---|---|
| Any person-to-person (P2P) transfer | Nil | - |
| Merchant payment up to Rs 2,000 | Nil | - |
| Merchant with UPI QR receipts up to Rs 1 lakh a month | Nil | - |
| Eligible merchant payment above Rs 2,000 | 0.4% | Rs 300 at Rs 75,000 and above |
| Railways, telecom, insurance, fuel, above Rs 2,000 | Flat Rs 5 per transaction | Rs 5 |
| Capital market - mutual funds, securities, broking | 0.02% | Rs 300 |
The provision that bars a payment system provider from imposing any charge on prescribed electronic modes. Its amendment in 2026 allowed the Centre to prescribe WHICH payments must stay charge-free, and on 14 September 2026 the Centre notified UPI payments up to Rs 2,000 and RuPay debit card payments as charge-free. NPCI's 0.4% MDR therefore sits above that protected floor.
The statute under which the Reserve Bank of India authorises and regulates payment systems in India. NPCI operates UPI, IMPS, RuPay, NACH, AePS, FASTag-NETC and BBPS under authorisation granted by the RBI under this Act.
Umbrella organisation for retail payments and settlement systems in India; it built and operates UPI, IMPS, RuPay, NACH, AePS, BBPS and the National Electronic Toll Collection network. It is a not-for-profit company promoted by the Reserve Bank of India and the Indian Banks' Association, and it issued the MDR circular
Regulator of payment and settlement systems under the Payment and Settlement Systems Act, 2007; it authorises NPCI and sets the policy frame within which pricing decisions are taken
General Awareness > Payment systems, NPCI products, RBI regulation and digital payment pricing
GS Paper 3 > Indian Economy > Digital public infrastructure, financial inclusion and government policies
General Awareness > Banking and economy current affairs
Which one of the following best describes the term "Merchant Discount Rate" sometimes seen in news?
Answer: The charge to a merchant by a bank for accepting payments from his customers through the bank's debit cards.
Consider the following statements: 1. National Payments Corporation of India (NPCI) helps in promoting the financial inclusion in the country. 2. NPCI has launched RuPay, a card payment scheme. Which of the statements given above is/are correct?
Answer: Both 1 and 2
Which of the following is a most likely consequence of implementing the 'Unified Payments Interface (UPI)'?
Answer: Mobile wallets will not be necessary for online payments.
With reference to digital payments, consider the following statements: 1. BHIM app allows the user to transfer money to anyone with a UPI-enabled bank account. 2. While a chip-pin debit card has four factors of authentication, BHIM app has only two factors of authentication. Which of the statements given above is/are correct?
Answer: 1 only
The fee paid on the merchant side of a digital payment, shared among the issuer bank, the acquirer, the payment app and its bank partner. It is not a tax.
Person-to-merchant and person-to-person transactions. Only eligible P2M payments above Rs 2,000 attract the new MDR; P2P stays free.
One hundredth of a percentage point. The 0.4% MDR is 40 basis points.
The issuer is the payer's bank; the acquirer onboards and settles for the merchant. They take 40% and 30% of the MDR respectively.