Payments

Govt locks 0.4% UPI MDR above ₹2,000 from 15 October

Merchants pay the charge, consumers stay free; small retailers and petrol pumps scramble for exemptions before the festive rush.

Kabir Menon, Payments correspondent·17 September 2026·4 min read

Smartphone showing UPI QR code on a shop counter beside a card machine

The government confirmed on 16 September there will be no rethink of the 0.4% Merchant Discount Rate on eligible UPI P2M transactions above ₹2,000, effective 15 October. The fee sits inside the merchant ecosystem with a ₹300 cap on large tickets. Essential categories such as fuel attract a flat ₹5.

Officials said the decision stands to make UPI self-sustaining for infrastructure and security. MDR applies only to specified merchant payments; AutoPay and most sub-₹2,000 tickets stay free. Capital-market payments face a lower 0.02% rate.

A kirana or apparel shop taking a ₹5,000 UPI hit will now lose ₹20 per ticket. Dark-store and quick-commerce checkouts that clear higher baskets feel it first on thin margins.

No question of reversing the 0.4% MDR decision.

Paytm, PhonePe and bank acquirers gain a revenue pool estimated earlier at ₹15,000-20,600 crore annually. Petrol dealers and small QR merchants are already petitioning for full or wider exemptions.

Watch the 15 October go-live and any Supreme Court hearing on the first legal challenge already filed.

Filed under Payments·Kabir Menon

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