NPCI: UPI P2M 0.4% Charge on Transactions Over ₹2000

• The National Payments Corporation of India (NPCI) announced a 0.4% Merchant Discount Rate (MDR) for specific UPI Person-to-Merchant (P2M) transactions.
• This charge applies only to transactions exceeding ₹2,000 and becomes effective on October 15, 2026.
• UPI payments for consumers, Person-to-Person (P2P) transfers, and most small-value merchant transactions will continue to be free.
• The new fee aims to adjust the economic framework for higher-value digital payments within India's Unified Payments Interface.

Specifically, a 0.4% MDR will be levied on designated Person-to-Merchant (P2M) transactions conducted via UPI that exceed a value of ₹2,000.

The National Payments Corporation of India (NPCI) has recently issued clarifications regarding the application of a Merchant Discount Rate (MDR) on certain Unified Payments Interface (UPI) transactions. Specifically, a 0.4% MDR will be levied on designated Person-to-Merchant (P2M) transactions conducted via UPI that exceed a value of ₹2,000. This significant change is slated to come into effect on October 15, 2026, marking a notable adjustment in the fee structure for higher-value digital payments in India.

This new charge targets a specific segment of the vast UPI ecosystem. The NPCI's announcement, delivered through frequently asked questions (FAQs), outlines the precise conditions under which the 0.4% charge will apply. It is imperative for businesses and payment service providers to understand that this fee is not universal across all UPI transactions but is narrowly defined for particular P2M interactions above the specified monetary threshold. The introduction of this India Merchant Discount Rate UPI reflects an evolving landscape in digital payments regulation India.

While the new 0.4% charge on NPCI UPI P2M transactions above ₹2000 represents a shift for certain business-to-consumer payments, the vast majority of UPI services will continue to be offered without any direct fees to the end-user or for smaller transactions. The NPCI has explicitly stated that consumers will not incur any charges when making UPI payments, ensuring that the convenience and cost-effectiveness for the general public remain intact.

Furthermore, Person-to-Person (P2P) transfers, which constitute a significant volume of daily UPI activity, will also remain free of any MDR. This commitment extends to most small-value merchant transactions, which are also exempt from the upcoming 0.4% fee. This strategic differentiation aims to preserve the accessibility and widespread adoption of UPI for everyday transactions, while introducing a charge only on higher-value P2M transaction charges India.

The implementation of a 0.4% charge on select UPI transaction fees above ₹2000 for P2M transactions, effective October 2026, signals a maturation of India's digital payment infrastructure. The National Payments Corporation of India, as the operator of the Unified Payments Interface, plays a crucial role in balancing the growth of digital transactions with the sustainability of the payment ecosystem. This targeted MDR could contribute to the operational viability of payment service providers handling larger commercial transactions.

Businesses, particularly those processing high-value P2M transactions, will need to factor this upcoming 0.4% charge into their financial planning and operational models well in advance of the October 2026 effective date. This regulatory adjustment underscores the dynamic nature of digital payments regulation India and highlights the ongoing efforts to refine the economic framework supporting one of the world's most successful real-time payment systems.

Compliance officers and legal counsel for businesses in India must review and update their payment processing agreements and financial forecasts to incorporate the new 0.4% MDR on UPI Person-to-Merchant transactions exceeding ₹2,000, effective October 2026, to ensure compliance and manage operational costs.

Source: Original reporting via SCC Times