Current Context: On 15 September 2026, the National Payments Corporation of India announced a revised Merchant Discount Rate framework for selected UPI merchant payments. Effective from 15 October 2026, eligible person-to-merchant transactions exceeding ₹2,000 will attract an MDR of 0.4%, subject to prescribed exemptions and limits. The fee must be borne by merchants and cannot be passed on to customers.
Key Points:
- Applicable transactions: The framework covers qualifying person-to-merchant UPI payments.
- Maximum charge: MDR is capped at ₹300 per transaction, including purchases of ₹75,000 or more.
- Small payments: Merchant transactions of up to ₹2,000 remain outside the revised charge.
- Personal transfers: Person-to-person UPI transactions continue to be free.
- Small-merchant exemption: QR-code merchants receiving up to ₹1 lakh per month through UPI are exempt.
- Essential categories: Railway tickets, fuel, agricultural inputs, telecom services, utility bills, insurance premiums, credit-card payments and taxes will attract a flat MDR of ₹5.
- Capital-market payments: These transactions will carry MDR of 0.02%, capped at ₹300.
- Customer protection: Banks and payment providers are prohibited from charging the amount directly to users.
- Revenue distribution: Collections will be shared among banks, payment applications and other payment-system participants.
- Development fund: Five per cent of the collections will support UPI adoption among small merchants and payment infrastructure in underserved regions.
- Not a tax: The amount is a service charge within the payment ecosystem and is not collected as government tax.
- Purpose: The revenue will support infrastructure expansion, cybersecurity, fraud prevention and customer service.
Question:
Q1. What MDR will apply to eligible UPI merchant transactions exceeding ₹2,000 under the revised framework?a) 0.2%
b) 0.4%
c) 0.6%
d) 1.0%
Answer: b) Eligible transactions will attract an MDR of 0.4%, with the total charge limited to ₹300 per transaction.
