UPI payments between consumers will continue to remain free, irrespective of the transaction value, while a nominal Merchant Discount Rate (MDR) of 0.4 per cent will apply to certain high-value merchant transactions over Rs 2,000, according to the latest payment framework announced by the Centre on Tuesday.
There will be no charges on person-to-person (P2P) UPI transactions, regardless of the amount being transferred.
For person-to-merchant (P2M) transactions, an MDR of 0.4 per cent will be levied on payments above Rs 2,000. The MDR will be capped at Rs 300 per transaction for high-value transactions of Rs 75,000 and above, the Ministry of Finance said in a release.
These new sets of rules for UPI payments will come into effect from October 15.
The changes are aimed at ensuring that everyday UPI transfers between individuals remain accessible without additional costs, while introducing a limited fee structure for larger merchant payments.
UPI has become a widely used digital payments platform in India, supporting both small-value everyday transactions and high-value payments to businesses and merchants.
What changes and what stays same in UPI payments
UPI payments between individuals will remain completely free, irrespective of the transaction amount, while charges will apply only to certain high-value payments made to merchants under the new framework.
P2P transactions remain free: There will be no charges on person-to-person (P2P) UPI transactions, regardless of their value. P2P payments account for 37 per cent of UPI transactions by volume and 70 per cent by value.
MDR on high-value merchant payments: A Merchant Discount Rate (MDR) of 0.4 per cent will apply to person-to-merchant (P2M) transactions above Rs 2,000. The charge will be shared among payment ecosystem participants, including banks and app providers. For transactions of Rs 75,000 and above, the MDR will be capped at Rs 300 per transaction.
Special rate for essential sectors: Transactions above Rs 2,000 involving sectors such as Railways, telecom, insurance, fuel and agricultural inputs will attract a flat MDR of Rs 5 per transaction. These sectors account for nearly 17 per cent of UPI P2M transactions by volume and around 46 per cent by value.
Charges on stock investments: Payments related to mutual funds, securities, stock brokers and dealers will attract an MDR of 0.02 per cent, capped at Rs 300 per transaction.
For Small vendors: Small merchants receiving up to Rs 1 lakh per month through UPI QR codes under the Person-to-Person-Merchant (P2PM) category will continue to enjoy mandatory zero MDR on all transactions.
No platform or hidden fees: UPI app providers will not be allowed to impose platform fees or hidden charges. Banks have also been advised to ensure that merchants do not pass MDR costs on to customers making UPI payments.
No monthly limits on free UPI transactions: Individuals will not face monthly quotas, volume limits or tiered caps on free UPI transactions.
Daily transaction limits are not charges: Daily UPI limits imposed by banks and NPCI, generally ranging from Rs 1 lakh to Rs 5 lakh depending on the transaction category, are security and risk-management measures and do not represent commercial transaction tiers or fees.