UPI Payments Above Rs 2,000 To Attract 0.4% Charge For Merchants, Consumers To Remain Exempt

India’s Unified Payments Interface (UPI) payment system is set for a change, with transactions above Rs 2,000 made to merchants attracting a charge from October 15. The National Payments Corporation of India (NPCI) has announced that a 0.4 per cent Merchant Discount Rate (MDR) will apply to select person-to-merchant (P2M) UPI transactions.

The move comes after the government notified that banks and payment service providers cannot impose any direct or indirect charge on UPI transactions of up to Rs 2,000. The new framework therefore keeps smaller-value digital payments free while allowing charges to be applied to certain higher-value merchant transactions.

Importantly, the charge will not be collected directly from consumers. MDR is a fee associated with processing payments and is levied on the merchant side of a transaction. The NPCI’s decision is expected to create a new revenue stream for banks and payment companies that have supported India’s rapidly expanding digital payments infrastructure.

The 0.4 per cent rate will apply to eligible transactions exceeding Rs 2,000. However, the revised framework does not mean that every UPI payment above the threshold will automatically attract the same charge. The fee is specifically linked to selected merchant transactions, while person-to-person transfers remain outside the scope of the levy.

For consumers, the immediate impact is therefore expected to be limited. UPI payments remain free for transactions covered by the government’s exemption, including payments up to Rs 2,000. The decision also seeks to protect the widespread use of UPI for routine, low-value purchases.

The introduction of MDR marks a significant shift in India’s UPI pricing structure. The system has operated largely without merchant charges, helping drive widespread adoption of digital payments across the country. The new arrangement attempts to balance that zero-cost model with the growing costs of maintaining payment infrastructure, security and technology.