However, official guidelines issued by the National Payments Corporation of India (NPCI) and the Ministry of Finance reveal a vastly different reality. The new rules introduce a revised Merchant Discount Rate (MDR) framework designed specifically for business ecosystem sustainability—not a fee on end consumers.
Below is a complete breakdown of what is changing, who pays the fee, and why everyday UPI usage remains completely free for common users.
What Is the New UPI Rule Effective October 15?
The NPCI announced that starting October 15, a 0.4% Merchant Discount Rate (MDR) will apply strictly to specified Person-to-Merchant (P2M) transactions exceeding ₹2,000. For high-value merchant transactions, this fee is capped at a maximum of ₹300 for payments of ₹75,000 or above.
Key Transaction Thresholds Overview:
| Transaction Type | Amount Threshold | Fee Applied | Paid By |
|---|---|---|---|
| P2P (Friends & Family) | Any Amount | ₹0 (Free) | N/A |
| Small Merchants (QR) | Up to ₹1 Lakh/month | ₹0 (Free) | N/A |
| P2M (General Shopping) | Up to ₹2,000 | ₹0 (Free) | N/A |
| P2M (Large Businesses) | Above ₹2,000 | 0.4% (Capped at ₹300) | Merchant Only |
| Railways / Telecom / Fuel | Above ₹2,000 | Flat ₹5 | Merchant Only |
No, consumers will NOT be charged.
The government and NPCI have explicitly clarified that the MDR is an internal banking fee collected within the payment processing infrastructure—it is not a consumer fee.
Person-to-Person (P2P) Transfers: Sending money to your family, friends, splitting dining bills, or transferring funds between your own linked bank accounts remains 100% free regardless of the payment amount. Scanning Local Shop QR Codes: Buying groceries, street food, or paying at neighborhood retail stores will not carry any transaction fee.
No Hidden Platform Charges: Payment applications and banks are prohibited from imposing convenience fees, platform charges, or passing MDR burdens onto retail customers.
Who Actually Pays the MDR Fee?
The Merchant Discount Rate (MDR) is borne entirely by commercial merchants accepting high-value digital payments. When a customer pays ₹5,000 to a registered business via UPI, the customer pays exactly ₹5,000. The acquiring bank deducts the 0.4% MDR fee (₹20) from the merchant's settlement payout, ensuring that payment processors and banking institutions can support digital payment infrastructure, server security, and fraud protection mechanisms.
Small Business Protections
To safeguard small vendors, street merchants receiving up to ₹1 Lakh per month via UPI QR codes remain completely exempt under the P2PM zero-MDR category. Over 96% of total merchant transactions across India fall below these threshold parameters and remain totally unaffected.
Concessions for Special Categories and Utilities
To prevent cost escalation in essential public services, the NPCI has instituted fixed, concessional fee slabs for specific sectors:
- Railways, Telecom, Insurance & Fuel: A flat fee of ₹5 per transaction applies for payments over ₹2,000.
- Capital Markets (Mutual Funds & Stocks): A nominal rate of 0.02% capped at ₹300 applies to investment platforms.
- Utility Bills & AutoPay Mandates: Automated recurring bill payments for electricity, water, and gas remain exempt from standard MDR surcharges.
You can continue using UPI without hesitation. Everyday transfers, routine retail transactions, and personal payments remain free, secure, and instant.The introduction of the MDR framework ensures the long-term technological stability and cybersecurity of India's real-time digital payment system while keeping digital banking accessible for all citizens.
