UPI fee rules from October 15: Who pays, how much and what stays free

UPI will remain free for consumers, but merchants will have to pay a fee on certain UPI transactions above Rs 2,000 from October 15.

The National Payments Corporation of India (NPCI) on Tuesday announced a revised UPI Merchant Discount Rate (MDR) framework for person-to-merchant (P2M) transactions.

Here is what you need to know about the new UPI fee rules.

What is changing for UPI payments?

Merchants will have to pay a fee of 0.4 per cent on receiving UPI payments of more than Rs 2,000 from October 15.

The revised UPI Merchant Discount Rate (MDR) framework will be effective from October 15.

Who will pay the UPI fee?

The fee will apply to merchants receiving eligible UPI payments. Consumers will continue to use UPI without being charged the MDR.

The new framework applies only to person-to-merchant (P2M) transactions.

Will consumers have to pay for UPI?

No. UPI will remain free for consumers.

NPCI clarified that the new charges will be passed to merchants.

What is the 0.4% MDR?

The Merchant Discount Rate is the fee applicable to eligible merchant transactions.

Under the revised framework, merchants will pay 0.4 per cent on UPI payments above Rs 2,000.

Is there a maximum UPI fee?

Yes. The MDR will be capped at Rs 300 per transaction.

This means the MDR will not exceed Rs 300 if a UPI payment of Rs 75,000 or more is made to a merchant.

Are there any merchant categories with a flat fee?

Yes.

UPI payments of more than Rs 2,000 to certain merchant categories such as railways, telecom services, insurance and fuel, among others, will attract a flat MDR fee of Rs 5 per transaction.

NPCI said:

“This flat-rate model prevents cost escalations in critical public services, utility bill collection, and thin-margin sectors like fuel retail. It ensures that essential consumer services remain low-cost and digitally efficient,”

What about UPI payments between individuals?

Person-to-person (P2P) UPI transactions will continue to be free, irrespective of the size of the transaction.

So, the revised MDR framework does not apply to P2P transactions.

What did the government notify on Monday?

The NPCI announcement came a day after the Ministry of Finance on Monday notified that banks and system providers cannot levy charges on UPI transactions of up to Rs 2,000 and RuPay debit card payments.

The government notification said:

“No bank or system provider shall impose, whether directly or indirectly, any charge upon a person making or receiving a payment by using the electronic modes of payment specified in paragraph above,”

The notification specified RuPay debit cards and UPI transactions of up to Rs 2,000.

When will the new UPI rules take effect?

The revised MDR framework will come into effect from October 15.

What stays free under the new rules?

UPI will remain free for consumers.

Person-to-person UPI transactions will also continue to be free, irrespective of the transaction amount.

The new MDR framework applies to person-to-merchant transactions.