Finance Minister Nirmala Sitharaman has clarified who will bear the Merchant Discount Rate (MDR) that will apply to certain high-value UPI merchant transactions from October 15, 2026.
Under the new framework, a 0.4% MDR will apply to specified person-to-merchant UPI transactions above ₹2,000, subject to the applicable rules and exemptions. The charge will be borne by the merchant rather than directly by the customer, Sitharaman said on September 25.
Editorial Insight
Key Highlights
Important points readers should notice.
Issue/Event: Finance Minister clarifies the payer of the new UPI MDR.
Location: New Delhi / India.
Authority/Organisation: Ministry of Finance and digital payments ecosystem.
Action Taken: Clarification issued ahead of the October 15 implementation.
Impact: Merchants, rather than customers directly, will bear the specified MDR.
The Finance Minister also clarified that MDR is not a tax, cess or surcharge and that the money collected through the charge will not go to the Government of India. It is a fee within the digital payments ecosystem involving payment service providers, banks and other participating entities.
The clarification comes after concerns and confusion over whether the new MDR could result in additional charges for people making UPI payments.
The new structure is scheduled to take effect from October 15. Person-to-person UPI transactions will remain outside the MDR framework, while the charge applies only to specified person-to-merchant transactions meeting the prescribed conditions.
Editorial Analysis
Why This Matters
UPI is used for a large number of daily retail payments, making any change to its fee structure relevant to consumers and businesses. The latest clarification is particularly important for customers because the government has stated that the MDR will not be added as a direct charge to consumers. At the same time, the effect of the fee on merchants and payment-service economics will depend on how businesses and participating entities implement the framework.
