The sustainability must not come at the cost of financial inclusion
FinTech BizNews Service
Mumbai, 16 September, 2026: The finalized Merchant Discount Rate (MDR) framework and threshold structure will take effect from 15th October 2026. FAQs on MDR by NPCI make amply clear the applicability of MDR for different stakeholders, including end users of UPI. The MDR is distributed only amongst the UPI ecosystem, to further invest into infrastructure resiliency, innovation, cybersecurity (protecting the UPI Infrastructure with banks and non-banks) and customer service.
A MDR of 0.4% will be introduced on Person-to-Merchant (P2M) UPI transactions above Rs 2,000/-. For transactions of Rs75,000/- and above, the MDR will be capped at Rs300 per transaction. UPI MDR is structured to be much lower than all traditional card-based transaction fees. Standard credit card MDRs typically range from 1.5% to 2.5% per transaction, while debit card MDRs are capped up to 0.90%. By setting the baseline UPI MDR at 0.4% on transaction above Rs 2,000 and capping it at Rs300 for high-value purchases, UPI remains the most affordable digital payment acceptance tool for commercial enterprises.
Vishwas Patel, Managing Director and CEO, AvenuesAI, and Chairman, Payments Council of India (PCI), explains:
"PCI has consistently maintained that UPI needs a sustainable economic model to support its scale. The continued growth of UPI requires banks, fintech companies, payment aggregators and other ecosystem participants to make sustained investments in infrastructure, cybersecurity, fraud prevention, technology and customer service. The introduction of 0.4% MDR on P2M transactions above Rs2,000, with a Rs300 cap on transactions of Rs75,000 and above, is an important step towards a viable economic model while keeping UPI free for consumers.
At the same time, sustainability must not come at the cost of financial inclusion. The continued zero-MDR protection for eligible small and micro merchants, along with support for expanding digital acceptance in Tier 3–6 centres, will help preserve UPI’s accessibility. The UPI ecosystem needs a viable economic foundation to support continued investment and innovation, while ensuring that consumers and small merchants continue to benefit from affordable digital payments."
