UPI's new merchant fee from 15 October: what changes, and what stays free
From 15 October 2026, some UPI payments to merchants above ₹2,000 will carry a 0.4% fee, capped at ₹300. Merchants pay it, not customers. Transfers between people, payments up to ₹2,000 and small merchants stay free, according to NPCI's FAQ as summarised by SCC Online.
What changed
- From 15 October 2026, a 0.4% merchant fee, capped at ₹300, is set to apply to some UPI merchant payments above ₹2,000.
What starts on 15 October
The National Payments Corporation of India (NPCI), which runs UPI, released an FAQ on 15 September 2026 describing a merchant discount rate (MDR) for some UPI payments. A merchant discount rate is the fee a shop or business pays to accept a digital payment.
According to SCC Online's summary of the FAQ, an MDR of 0.4% will apply to person-to-merchant UPI payments above ₹2,000 from 15 October 2026. For payments of ₹75,000 and above, the fee is capped at ₹300 per transaction. Both SCC Online and DD India describe the framework as proposed.
What stays free
Sending money to another person, known as a person-to-person or P2P transfer, remains free whatever the amount. UPI payments of up to ₹2,000, including payments to shops, also stay free.
Small merchants that receive up to ₹1 lakh a month through UPI QR codes will continue to pay no MDR, and they do not need a GST registration to qualify, SCC Online reported. DD India also reported the ₹1 lakh limit.
Who pays the fee
Customers do not. The FAQ says consumers can continue to use UPI free of cost, and merchants are not permitted to pass the MDR on to customers. If a shop asks you to pay extra for paying by UPI, that is not how the framework is meant to work.
Lower rates for some payments
SCC Online's summary lists concessions for some kinds of payment above ₹2,000. Railways, telecom, insurance, fuel and other notified categories would pay a flat ₹5 per transaction instead of 0.4%. Capital market payments, such as mutual funds and stockbrokers, would pay 0.02%, capped at ₹300. Educational institutions would get concessional or capped rates.
These category rates come from one summary, and other explainers describe them differently, so check NPCI's final circular before relying on them.
UPI's scale
UPI handled 24.07 billion transactions worth ₹29.37 lakh crore in September 2026, up 23% in number and 18% in value from a year earlier, NPCI data reported by DD India show. That works out to about 802 million payments a day, worth about ₹97,913 crore. In August, UPI processed 24.51 billion transactions.
What to do
As a customer, nothing changes in how you pay. As a merchant, ask your bank or payment provider which rate applies to your payments above ₹2,000, and check whether your monthly UPI receipts keep you under the ₹1 lakh limit for zero MDR.
Why it matters
- UPI handles about 802 million payments a day; the fee changes what merchants pay on larger payments, not what customers pay.
- Small shops and everyday payments up to ₹2,000 stay free, so most daily UPI use is unaffected.
What remains uncertain
- The sources describe the framework as proposed; the final terms are in NPCI's circular, which the AI desk could not open.
- Concessional rates for railways, telecom, insurance, fuel, capital markets and education differ between explainers.
Facts and evidence
From 15 October 2026, a 0.4% MDR is to apply to person-to-merchant UPI payments above ₹2,000, capped at ₹300 for payments of ₹75,000 and above.
Person-to-person transfers stay free at any amount, and UPI payments up to ₹2,000 stay free.
Merchants receiving up to ₹1 lakh a month through UPI keep zero MDR.
Consumers continue to use UPI free, and merchants are not permitted to pass the MDR on to customers.
SCC Online lists a flat ₹5 per payment above ₹2,000 for railways, telecom, insurance, fuel and other notified categories, and 0.02% (capped at ₹300) for capital market payments.
UPI processed 24.07 billion transactions worth ₹29.37 lakh crore in September 2026, about 802 million a day.
Sources
SCC Online: UPI MDR explained: no charges for consumers, 0.4% fee on select merchant transactions above ₹2,000 (16 September 2026)Read at the source · EN
UPI MDR explained: no charges for consumers, 0.4% fee on select merchant transactions above ₹2,000 (16 September 2026)
Read the original sourceDD India: UPI transactions surge 23% to 24.07 billion in September: NPCI (1 October 2026)Read at the source · EN
UPI transactions surge 23% to 24.07 billion in September: NPCI (1 October 2026)
Read the original source