The Finance Ministry clarified on September 15, 2026 that person-to-person UPI transfers would remain free regardless of the amount. It also said payments to merchants up to Rs 2,000 and transactions covered by the small-merchant zero-MDR framework would remain unaffected. The ministry estimated that approximately 96 percent of person-to-merchant transactions would continue without the new merchant discount rate.
The Department of Financial Services' accompanying FAQ set October 15, 2026 as the effective date for the revised framework. For eligible direct account-to-merchant payments above Rs 2,000, it described a 0.4 percent MDR, capped at Rs 300 for transactions of Rs 75,000 or more. Special merchant categories have separate terms, so that headline rate does not describe every payment above the threshold.
The FAQ said merchants could not pass MDR on to customers and UPI applications could not levy a platform charge for UPI payments. It also retained zero MDR for qualifying Person-to-Person-Merchant accounts receiving up to Rs 1 lakh a month through QR payments. Credit cards and credit lines linked to UPI operate under separate product rules, rather than the direct-account provisions discussed in this clarification.
The ministry explained that MDR is a payment-processing charge distributed within the payments ecosystem, not a tax collected by the government or NPCI. Its September statement described the change as support for operating and expanding UPI while protecting individuals and small merchants. The announcement therefore concerned how specified merchant acceptance costs are funded, while retaining the stated protections for consumers.
NPCI's merchant guidance identifies the acquiring bank as the institution that onboards a merchant and assigns the appropriate merchant-category code. It lists QR, intent, application-based and collect arrangements among acceptance methods. Those existing account and business classifications are relevant to the September clarification: the payment amount is only one part of the rule, alongside the recipient's merchant category and the underlying payment product.
