New UPI Rules Explained: What It Means For You ?

UPI payments above Rs.2,000 made to businesses will attract a 0.4% MDR from 15 October 2026, while customer-to-customer and person-to-person payments will remain free.

UPI Payments Above Rs.2,000 to Some Businesses Will Have a New Charge

UPI is used by millions of Indians every day to pay at shops, buy food, pay bills, and send money to friends and family.

From 15 October 2026, some UPI payments made to businesses will have a new Merchant Discount Rate (MDR).

The charge will apply to certain payments of more than Rs.2,000 made to businesses. The MDR will be 0.4%, with a maximum charge of Rs.300 per transaction. For example, if you pay a shop Rs.10,000 through UPI, the merchant would pay Rs.40 as MDR. If the payment is Rs.1 lakh, the 0.4% charge would normally be Rs.400, but the merchant would pay only Rs.300 because of the maximum limit.

The customer will not have to pay this charge. Person-to-person UPI payments will also remain free, such as sending money to a friend or family member. Payments of up to Rs.2,000 to businesses will remain free. Small merchants receiving up to Rs.1 lakh per month through UPI will also be covered under the Zero-MDR system.

Some categories, including railways, telecom, insurance, fuel and agricultural products, will have a fixed MDR of Rs.5 for eligible transactions above Rs.2,000.

The Finance Ministry says around 96% of merchant UPI transactions will remain unaffected. It also said the MDR is not a tax collected by the government. The money will be shared among banks and other companies involved in processing UPI payments to support the payment system.UPI was launched in 2016 and has grown rapidly in India. NPCI's latest data shows more than 24.5 billion UPI transactions in August 2026 alone.

The new charge has raised concerns among some businesses and industry voices. Entrepreneur Ashneer Grover criticised the move and argued that merchants could pass the additional cost on to customers or become less willing to accept UPI for larger payments.

The government says the new system is intended to support the long-term growth and sustainability of UPI, while businesses are concerned about the additional cost.

The new rules will come into effect from 15 October 2026.