UPI Merchant Fee Proposal: What You Need to Know

Public Lokpal
September 15, 2026

The Reserve Bank of India and NPCI are discussing a proposed 0.4% Merchant Discount Rate (MDR) on high-value UPI transactions made to businesses.

Crucially, everyday users remain unaffected. Transactions up to Rs 2,000 remain entirely free, and regular Person-to-Person (P2P) money transfers between individuals will not attract any charges.

Furthermore, the proposed fee is levied strictly on merchants, not consumers.

If you buy items worth Rs 5,000, you only pay Rs 5,000 at checkout, though the business may absorb a small processing fee.

This proposal aims to create a sustainable revenue model for banks and payment apps maintaining massive UPI infrastructure.

While the 0.4% rate and specific caps for higher-value payments are still under active consultation and review, the zero-fee structure for low-value retail transactions is designed to protect micro-payments and promote financial inclusion across India.