NEW DELHI: Selected businesses will pay a flat ₹5 Merchant Discount Rate (MDR) on UPI payments above ₹2,000 under a new framework that will come into effect from October 15, 2026, according to the National Payments Corporation of India (NPCI).
The new rules will introduce a standard MDR of 0.4% for certain UPI merchant transactions above ₹2,000. However, some sectors will get a concessional flat rate of ₹5 per transaction.
Railways, telecom services, insurance and fuel are among the categories covered by the flat-rate system. This means an eligible merchant will pay only ₹5 even when the transaction value is much higher.
For example, a ₹10,000 UPI payment would attract ₹40 under a 0.4% MDR. But an eligible merchant in a flat-rate category would pay ₹5.
Fuel payments
Fuel purchases above ₹2,000 at petrol pumps will qualify for the ₹5 flat MDR. Payments below ₹2,000 will continue to have zero MDR.
This could help petrol pump operators avoid higher processing costs on large UPI payments.
Electricity and water bills
Selected government utility payments will also come under the concessional structure. Electricity, municipal water and piped natural gas payments above ₹2,000 will attract a flat ₹5 MDR instead of the 0.4% rate.
Payments below ₹2,000 will continue to have zero MDR.
Why the change?
Under the standard system, a 0.4% MDR will apply to eligible UPI transactions above ₹2,000, with the charge capped at ₹300 for transactions of ₹75,000 or more.
The flat ₹5 rate is designed to keep processing costs lower for sectors that handle high-value payments but may operate on relatively low margins.
No charge for consumers
The new MDR is a merchant-side charge. Consumers will continue to use UPI without paying an additional transaction fee.
The changes therefore affect how merchant transactions are charged within the UPI ecosystem, rather than introducing a direct fee for consumers.
