While being competitive compared with the MDR on debit cards and credit cards, the regime also includes exemptions and relief to small merchants. Here’s an explainer.

What are the transactions that will receive special treatment under the proposed UPI MDR regime?

In general, person-to-merchant (P2M) transactions above ₹2,000 attract an MDR of 0.4 per cent, capped at ₹300 per transaction, and chargeable to the merchant. However, MDR on certain transactions attract a flat MDR of ₹5, when the value exceeds ₹2,000. These include railway ticket booking, insurance premiums, utility bill (electricity, PNG, municipal water) payments, purchase of fuel at fuel stations and education fee payments (tuition fee, exam fee, etc.).

Capital market transactions also have been given relief. MDR on payments towards mutual funds, securities and stockbrokers is set at a nominal 0.02 per cent of the transaction value, again capped at ₹300.

Does UPI MDR apply to all merchants?

No. Small merchants receiving up to ₹1 lakh per month through UPI QR have been categorised under a special P2PM (person-to-person-merchant) framework and will be exempt from UPI MDR. Also, a dedicated fund which will be funded out of MDR collected on transactions with large merchants has been planned to subsidise such small merchants.

Small merchants with inward credit of UPI payment more than ₹1 lakh per month, consecutively for 3 months, will be transitioned out of P2PM to the general P2M category. In such a case, the above said 0.4 per cent MDR will start to apply.

Does MDR apply to transactions made via Credit Cards linked on UPI?

UPI transactions through credit cards, such as the RuPay credit card liked to UPI, operate under separate rules and charges applicable to credit cards. The MDR discussed here only applies to direct users’-account-to-merchant-account UPI transactions.

Will the proposal affect your P2P net banking transactions?

No. The proposed MDR applies only to UPI transactions. P2P transactions via net banking modes such as IMPS, NEFT and RTGS are kept out of the said charge.

How much money could the proposal raise for the ecosystem players?

The total UPI transaction value for the month of August 2026 is recorded at ₹298 lakh crore. Of these P2M transactions of ticket size above ₹2,000 account form about 20 per cent or roughly ₹6 lakh crore. Theoretically applying a blanket 0.4 per cent MDR on this figure yields an MDR collection of around ₹2,400 crore or approximately ₹29,000 crore when annualised.

However, given the above exemptions, the collections could be much lower than this estimate. But as transactions continue to grow, MDR collections can also grow sizeably.

Published on September 15, 2026