The National Payments Corporation of India (NPCI) on Tuesday said that it has revised Merchant Discount Rate (MDR) framework for select UPI transactions, under which charges will apply to certain merchant payments above Rs 2,000, while small merchants and low-value transactions will continue to benefit from zero MDR.

The revised framework will come into effect from October 15, 2026, while UPI transactions will remain free of cost for consumers. More than 95 per cent of low-value UPI Person-to-Merchant (P2M) transactions, involving payments of up to Rs 2,000, will remain outside the scope of MDR.

Under the new framework, a 0.4 per cent MDR will apply to specified P2M UPI transactions above Rs 2,000. The MDR will be capped at Rs 300 per transaction. A flat MDR of Rs 5 per transaction will apply to UPI payments above Rs 2,000 in selected merchant categories, including railways, telecom services, insurance and fuel.

Person-to-Person (P2P) transactions will continue to remain free, while P2M transactions of up to Rs 2,000 will also remain outside the MDR framework. This means consumers will continue to use UPI without paying any transaction charges.

Small merchants operating under the Person-to-Person Merchant (P2PM) framework will continue to benefit from zero MDR. The category covers small vendors receiving up to Rs 1 lakh per month through UPI QR payments directly into their bank accounts, supporting wider digital payment acceptance across the unorganised retail sector.

The revised framework also proposes a dedicated fund to support the expansion of UPI acceptance among small merchants, particularly in existing merchant networks and Tier-3 and smaller markets. The initiative is aimed at strengthening digital payment infrastructure and encouraging more small businesses to adopt UPI.

According to the framework, the MDR collected on higher-value transactions will be distributed among players across the UPI ecosystem. The move is expected to support investments in areas such as payment infrastructure, resilience, cybersecurity and innovation while helping expand UPI adoption among new users and merchants.