The National Payments Corporation of India (NPCI) has officially confirmed a new fee structure for UPI transactions, clarifying that a Merchant Discount Rate (MDR) of 0.4% will apply to select Person-to-Merchant (P2M) payments above ₹2,000, effective October 15, 2026 — while reiterating that ordinary consumers will continue to use UPI completely free of cost.
The Announcement
The confirmation came on Tuesday, September 15, 2026, a day after the Finance Ministry issued a gazette notification on September 14 clarifying the legal framework around UPI charges. That notification explicitly stated that no bank or payment system provider can impose direct or indirect charges on UPI transactions up to ₹2,000, or on RuPay debit card payments — closing off any possibility of small-value transactions being taxed.
Following this, NPCI issued its own detailed statement laying out exactly how charges above the ₹2,000 threshold will work.
What’s Changing
According to NPCI, a 0.4% MDR will be introduced specifically on Person-to-Merchant UPI transactions exceeding ₹2,000. Separately, a flat MDR of ₹5 per transaction will apply to UPI payments above ₹2,000 made in specified merchant categories, including railways, telecom services, insurance, and fuel purchases.
Crucially, NPCI emphasized that this charge is borne by merchants, not consumers. In its official statement, NPCI said: “UPI services will continue without any cost to consumers. Consumers can continue to transact free-of-cost using UPI as they have been doing till now.”
P2P Transactions Remain Untouched
The corporation also clarified that Person-to-Person (P2P) UPI transactions — such as sending money to friends, family, or personal contacts, and even self-transfers between one’s own accounts — will remain entirely free for both the sender and receiver, with no charges under any circumstances, regardless of transaction amount.
Read More: Ashneer Grover Slams Proposed Fees on Digital Payments
Who Is Actually Affected?
Data cited by NPCI shows that small-value UPI transactions up to ₹2,000 account for more than 95% of total P2M UPI transaction volume, meaning the vast majority of everyday purchases — groceries, food delivery, transport, and small retail purchases — will see absolutely no impact from this change. The new MDR is designed to target higher-value merchant transactions specifically.
Addressing Public Confusion
The announcement comes amid significant public confusion and political back-and-forth over the past week, with some reports and social media claims suggesting consumers themselves might be charged a fee — including unverified claims of a “0.5% UPI fee” being pushed onto users. BJP IT cell head Amit Malviya publicly rejected such claims from opposition parties as “completely false,” reinforcing the government and NPCI’s consistent position that no consumer-facing charge has been introduced.
Why This Matters
UPI has grown into one of the world’s largest real-time digital payment systems, with transaction values rising from ₹21.3 lakh crore in FY 2019-20 to over ₹260 lakh crore by March 2025. The introduction of a merchant-side MDR is widely seen as a move toward long-term financial sustainability for the ecosystem, following years of a zero-MDR model that some industry voices — including BharatPe co-founder Ashneer Grover — have argued places disproportionate strain on the banking and payments infrastructure.
For now, the message from both the government and NPCI is unambiguous: UPI remains free for the ordinary Indian consumer, both today and after October 15.