No MDR charges will apply to these 7 types of UPI payments; find out the rules..
Here is important news for UPI users. A new Merchant Discount Rate (MDR) framework will come into effect for certain merchant transactions starting October 15, 2026. Under this framework, the charges will not be uniform for all merchants; the MDR rate will depend on the sector or category in which the merchant operates.
However, the new MDR rule does not mean that customers will have to pay a charge every time they make a payment via UPI. These charges will apply only to specific merchant transactions. Standard UPI payments will not become chargeable simply because they are made using UPI.
Let us look at the seven types of transactions that will be exempt from MDR charges:
1. Sending money to friends and family
If you send money to friends or family members via UPI, the payment remains free. No MDR charge applies to Person-to-Person (P2P) transfers, regardless of the amount.
2. Receiving money in your bank account
There is no MDR charge for receiving money into your bank account via UPI. In other words, if someone sends you money via UPI, you will not be charged for receiving it.
3. Payments to small shopkeepers
Small shopkeepers and street vendors will also benefit from MDR relief. Small businesses receiving payments of up to ₹1 lakh per month via UPI QR codes under the Person-to-Person-Merchant (P2PM) category will incur zero charges on all transactions.
4. Purchases up to ₹2,000
No MDR charge will apply to payments of up to ₹2,000 made to any merchant. All transactions up to ₹2,000 in the Person-to-Merchant (P2M) category will be exempt from MDR.
5. Purchases under ₹2,000 from large merchants
If you make a purchase of less than ₹2,000 from a regular or large merchant, no MDR charge will apply. However, an MDR of 0.4% may apply to certain payments exceeding ₹2,000. In such cases, the charge will be borne by the merchant, not the customer.
6. UPI AutoPay
Recurring payments for subscriptions or bills made via UPI AutoPay will also be exempt from MDR charges. This means no MDR charge will apply when setting up regular auto-payments.
7. Payments for essential services
No MDR will be charged on payments below ₹2,000 in essential and low-margin sectors such as railways, telecommunications, insurance, fuel, and agricultural inputs. Small transactions related to these services will fall under the zero-MDR category.
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