UPI: Big news for UPI users. The proposed Merchant Discount Rate (MDR) for specific UPI transactions over ₹ 2,000 has sparked concerns among users, merchants, and various stakeholders. In response, Finance Minister Nirmala Sitharaman clarified that this charge will be imposed on merchants and will not be transferred to customers.
As per report on September 25, Nirmala Sitharaman explained that MDR is not categorized as a tax, cess, or surcharge, and the generated revenue will not be directed to the government.
Details about the new UPI MDR:
Effective from October 15, 2026, a 0.4% MDR will be applicable to UPI payments from specific individuals to merchants over Rs 2,000, capping at Rs 300 for transactions exceeding Rs 75,000. However, person-to-person UPI transactions will remain free. The government estimates that around 96% of merchant UPI transactions will not be impacted by this change. Small businesses with monthly UPI QR collections up to Rs 1 lakh will be exempt from the revised MDR.
Nirmala Sitharaman highlighted that consumers need not be concerned about this fee as it is evident they will not bear it. She mentioned that there seems to be some misunderstanding among certain individuals regarding the system.
The Finance Minister emphasized that the MDR applied to payments above Rs 2,000 will be shouldered by the merchant, drawing a comparison to existing card payment practices where merchants already cover such fees. She noted that typically, merchants do not directly pass on this fee to customers but may adjust prices through promotions or other business strategies. Furthermore, Nirmala Sitharaman underscored that MDR is not a tax, cess, or surcharge, and the collected amount will not be received by the Government of India.
VIDEO | Delhi: On MDR charges on UPI payments, Union Finance Minister Nirmala Sitharaman (@nsitharaman) says, “I don’t think customers are worried because we are clearly saying that this is not going to the consumer. There are, of course, I’m sorry to say, people who have not… pic.twitter.com/5vsWqmKTTv
“>September 25, 2026
What concerns customers?
The primary query now is whether businesses will absorb the MDR cost themselves or find alternative ways to transfer it to customers. The government assures that banking institutions will collaborate with businesses and industry associations to ensure that customers are not burdened by this fee. Therefore, the main takeaway for regular UPI users is that the proposed MDR will not be directly imposed on them; instead, it will be charged to the respective merchants.