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Revised MDR Framework for UPI P2M Payments
The Ministry of Finance notifies a revised Merchant Discount Rate (MDR) framework for Unified Payments Interface (UPI) transactions. The framework introduces a nominal MDR on select large-value Person-to-Merchant (P2M) payments from October 15, 2026, and is implemented via National Payments Corporation of India (NPCI) guidelines.
Revised MDR Framework:
| Dimension | Key Details |
|---|---|
| MDR definition | MDR provides for a fee levied on merchants for processing digital payment transactions. |
| MDR sharing mechanism | The collected MDR is shared among acquiring banks, issuing banks, payment service providers (PSPs), and third-party app providers (TPAPs). |
| P2P transfers | Person-to-Person (P2P) transfers remain 100% free for consumers, irrespective of the transaction amount. |
| P2M threshold for zero MDR | P2M transactions valued up to ₹2,000 attract zero MDR. |
| Standard MDR rate for P2M above threshold | For P2M transactions exceeding ₹2,000, a standard MDR of 0.4% applies. |
| Cap on high-value transactions | For transactions of ₹75,000 and above, the MDR is capped at a maximum of ₹300. |
| Concessional MDR for essential sectors | Critical public utility services pay a flat MDR of ₹5 per transaction above ₹2,000, comprising railways, telecom, insurance, fuel, and agricultural inputs. |
| Concessional MDR for capital markets | Payments towards stockbrokers, securities, and mutual funds attract an MDR of 0.02%, capped at ₹300. |
| Small vendor exemption | Small street vendors receiving up to ₹1 lakh per month via QR codes under the Person-to-Person-Merchant (P2PM) classification remain exempt from MDR. |
| Prohibition on consumer surcharges | UPI apps and merchants are prohibited from charging platform fees or passing on MDR costs to end consumers. |
| UPI volume/value shares stated | P2P transfers constitute about 37% of UPI volume and about 70% of UPI value. |
| Share of UPI merchant transactions below threshold stated | About 96% of all UPI merchant transactions fall below the ₹2,000 threshold. |