FAQs On NPCI's Introduction of Nominal MDR on High‑Value UPI Transactions, Safeguarding Small Merchants

FREQUENTLY ASKED QUESTIONS (FAQs)

Section 1: Policy Objectives

Q1. Why is this Merchant Discount Rate (MDR) being introduced now?

Answer: UPI processes billions of transactions every month. The MDR is distributed only amongst the UPI ecosystem, to further invest into infrastructure resiliency, innovation, cybersecurity and customer service. Charges are applicable only for transactions above ₹2,000.

Q2. Will small-value UPI transactions be impacted?

Answer: No impact on transactions up to ₹2,000, which comprise more than 95% of UPI (P2M) volume.

Q3. What MDR is being introduced for merchants on UPI transactions?

Answer: MDR of 0.4% on P2M transactions above ₹2,000. For transactions of ₹75,000 and above, capped at ₹300.

Q4. How does UPI MDR compare to traditional Debit and Credit Card MDRs?

Answer: UPI MDR is lower. Credit card MDRs: 1.5%–2.5%. Debit card MDRs: up to 0.90%. UPI MDR baseline: 0.4%, capped at ₹300.

Q5. When do the updated MDR provisions take effect?

Answer: Effective from 15th October 2026.

Q6. How does this compare with international payment systems?

Answer: Global systems support infrastructure and innovation. India prioritises accessibility, scale, inclusion.

Q7. Who decides the ultimate implementation and enforcement of MDR caps?

Answer: NPCI’s UPI and Services Steering Committee.

Q8. What is the dedicated fund for small merchant that is being proposed out of MDR?

Answer: Fund for Tier 3–6 centres, NE states, J&K, Ladakh, and notified schemes like PM SVANidhi.

Q9. How does the proposed dedicated fund help small merchants?

Answer: Supports expansion of UPI acceptance, incentives for rural and small merchants.

Q10. Why is reliance on government subsidies alone no longer sufficient for UPI?

Answer: Annual cost ~₹20,000 crore. Subsidies create uncertainty. Threshold-based model ensures sustainability.

Q11. How will this move drive market competition among payment app operators?

Answer: Sustainable framework encourages startups, levels playing field, improves services.

Q12. How does this policy ensure cybersecurity resilience against emerging threats?

Answer: MDR revenue funds cybersecurity, AI fraud detection, encryption upgrades.

Q13. How far has UPI expanded internationally as of 2026?

Answer: Live in 11 foreign countries.

Q14. What is the current UPI's transaction volume and value scale?

Answer: August 2026: 2,451 crore transactions worth ₹29.9 lakh crore.

Section 2: General Consumer

Q15. Will ordinary consumers be charged?

Answer: No, UPI remains free for consumers.

Q16. Is there any charge for P2P transactions?

Answer: No, P2P transactions remain free.

Q17. Will UPI Apps start charging platform fee?

Answer: No, platform fees prohibited.

Q18. Will consumer prices rise?

Answer: No, merchants absorb nominal costs.

Q19. Will I need to pay a fee when scanning QR codes?

Answer: No, QR payments remain free.

Q20. Are there monthly caps on free UPI transactions?

Answer: No, unlimited free transactions.

Q21. Where can users verify official updates?

Answer: Ministry of Finance, RBI, NPCI official releases.

Q22. Does MDR affect auto-debit recurring payments?

Answer: No, AutoPay mandates exempt.

Section 3: Micro Merchants (P2PM)

Q23. Will small local vendors be charged MDR?

Answer: No, P2PM merchants enjoy zero MDR.

Q24. What is the P2PM framework?

Answer: Specialized account category, zero MDR up to ₹1 lakh/month.

Q25. Do small merchants need to upgrade QR codes?

 Answer: No, existing QR codes continue.

Q26. What if a small merchant receives payment above ₹2,000?

Answer: MDR depends on account category. P2PM exempt.

Q27. When will dedicated fund framework be finalized?

Answer: Within three months, with RBI consultation.

Q28. Is GST registration required?

Answer: No, eligibility based on thresholds.

Q29. How will banks identify small merchants?

Answer: Transaction velocity checks, transition after 3 months above ₹1 lakh.

Q30. Does zero MDR apply in rural areas?

Answer: Yes, rural QR payments exempt.

Section 4: Large Merchants & E-Commerce

Q31. What MDR is applicable?

Answer: 0.4% above ₹2,000, capped at ₹300.

Q32. Is there a maximum fee cap?

Answer: Yes, ₹300 cap for ≥₹75,000.

Q33. Which categories qualify for flat MDR?

Answer: Railways, telecom, insurance, fuel: flat ₹5 above ₹2,000.

Q34. Can merchants pass MDR to buyers?

Answer: No, prohibited.

Q35. How is MDR calculated?

Answer: Example: ₹3,000 → ₹12; ₹50,000 → ₹200; ₹1,00,000 → capped ₹300.

Amount paid	Applicable MDR	MDR paid
₹2,000	-	₹0
₹3,000	0.40%	₹12
₹50,000	0.40%	₹200
₹75,000+	Fixed ₹300	₹300

Q36. Does MDR apply to Credit Cards linked on UPI?

Answer: No, separate credit product rules.

Section 5: Capital Market Transactions

Q37. What MDR applies?

Answer: 0.02% capped at ₹300.

Q38. Which entities covered?

Answer: AMCs, SEBI brokers, securities dealers, investment platforms.

Section 6: Specialized Sectors

Q39. Insurance premium payments?

Answer: Flat ₹5 above ₹2,000.

Q40. Fuel purchases?

Answer: Flat ₹5 above ₹2,000. Below ₹2,000 free.

Q41. Government utility bills?

Answer: Flat ₹5 above ₹2,000. Below