What happened
Starting 15 October 2026, a 0.4% Merchant Discount Rate (MDR) will apply to UPI Person-to-Merchant (P2M) transactions of ₹2,000 or more.
From October 15, 2026, a 0.4% Merchant Discount Rate (MDR) will apply to UPI Person-to-Merchant (P2M) transactions of ₹2,000 or more.
Only about 2.5% of UPI transactions by volume will face the MDR charge, but these account for roughly 20% of total UPI value.
At maximum, the framework could generate about ₹2,400 crore of MDR revenue per month.
The largest share goes to the payer's issuing bank, but PhonePe and Google Pay together account for nearly 80% of UPI volume.
Person-to-person UPI payments remain free, and small merchants receive up to ₹1 lakh per month without MDR.
Who gains from the MDR
The RBI introduced MDR to strengthen the long-term sustainability of India's digital payments ecosystem. The fee is split across the payer bank, merchant bank, UPI apps and other processors.
- RBI justified MDR as strengthening long-term sustainability of UPI
- 22-member panel of banks, payment firms and industry bodies examined the proposal
Why it matters for me
Only about 2.5% of UPI transactions by volume will be charged, but they account for roughly 20% of UPI value, potentially generating ₹2,400 crore per month in revenue.
Money
Small Merchants · Business Executives
Merchants will bear a 0.4% cost on large UPI payments, though the Finance Ministry has advised against passing it on to customers.
Daily Life
General Public
Only 2.5% of UPI users making big-ticket payments will see any charge, but the change reshapes who profits from India's dominant payment rail.
Money
Business Executives
PhonePe and Google Pay, with ~80% of UPI volume, stand to collect the largest share of the new MDR revenue pool.
What to remember
Big UPI payments just got costlier for merchants, and foreign UPI apps like PhonePe and Google Pay are set to pocket the biggest share.
From Oct 15, a 0.4% MDR on large UPI payments reshapes who profits from India's payment rails. PhonePe and Google Pay may get the biggest cut.
Verified sources (5)
In graphs | Why private banks and foreign UPI apps stand to gain from the MDR charge
↗Introduction of MDR on large value transactions to strengthen UPI's long-term sustainability: RBI
↗MDR on UPI notified: NPCI says 0.4% fee applicable on person-to-merchant transactions above Rs 2,000 effective October 15, 2026
↗UPI charges from October 15: 0.4% MDR on payments above Rs 2,000, but flat Rs 5 fee for railway tickets, fuel, insurance and utilities; sending money to friends, family, Autopay for OTT stays free
↗UPI MDR from October 15: Will your mutual fund SIP, insurance premium or OTT AutoPay get costlier?
↗Claims and linked sources
10 claimsFrom October 15, 2026, a 0.4% Merchant Discount Rate (MDR) will apply on UPI Person-to-Merchant (P2M) payments of ₹2,000 or more made to mid and large merchants.
Only about 2.5% of UPI transactions by volume will face the MDR charge; the transactions that attract MDR account for roughly 20% of the value of all UPI transactions.
At the maximum, the MDR framework will generate about ₹2,400 crore of revenue per month.
All Person-to-Person (P2P) UPI transactions will remain free of charge regardless of amount, and payments to merchants up to ₹2,000 will also remain free of MDR.
Of the MDR collected, the biggest share goes to the customer's or payer's bank, followed by the merchant's bank, the UPI apps, and then other payment processors.
Among banks used by customers for UPI payments, Yes Bank leads by a huge margin, followed by ICICI Bank.
Among banks used by merchants to receive UPI payments, Yes Bank is the clear favourite, followed by Axis Bank, ICICI Bank, and HDFC Bank.
PhonePe (Walmart-owned) and Google Pay together account for nearly 80% of UPI transaction volume, meaning they will receive the largest chunk of MDR collected.
The Reserve Bank of India said the introduction of MDR on large-value UPI transactions is an important step towards strengthening the long-term sustainability of India's digital payments ecosystem.
Banks have been advised to ensure merchants do not pass MDR charges on to customers, and UPI application providers are expressly prohibited from imposing platform fees or hidden charges.