A structured policy revision is set to take effect across India's digital payments infrastructure. Starting October 15, 2026, a revised Merchant Discount Rate (MDR) structure will be introduced for Unified Payments Interface (UPI) transactions. Details posted by the Ministry of Finance on social media platform X confirm that this framework applies solely to specified business-to-merchant (P2M) transactions exceeding Rs 2,000. Everyday individual consumers will experience no changes, as peer transactions and standard retail payments remain entirely free of charge.
Ten Specific Payment Categories Subject to MDR
Under the guidelines shared by the Ministry of Finance, the charge will cover targeted commercial and capital market transactions exceeding Rs 2,000. The framework identifies ten specific transaction types
- General merchant payments exceeding Rs 2,000
- Railway ticketing payments exceeding Rs 2,000
- Telecom and mobile recharge transactions above Rs 2,000
- Insurance premium payments exceeding Rs 2,000
- Fuel purchases including petrol and diesel above Rs 2,000
- Agricultural input purchases such as seeds and fertilisers above Rs 2,000
- Mutual fund investments
- Securities-related transactions
- Stockbroker payments
- Transactions involving share market dealers
Calculated Rates and Specified Upper Caps
The revised structure differentiates rates across sectors to account for operating margins. For standard retail merchant transactions valued above Rs 2,000, an MDR rate of 0.4 percent will apply. To protect high-value settlements, a capping mechanism fixes the maximum possible deduction at Rs 300 for payments amounting to Rs 75,000 or greater.
Essential low-margin sectors, including railway services, fuel pumps, insurance coverage, and telecommunications, will not be subject to a percentage levy. Instead, these specific categories will attract a flat fee of Rs 5 per eligible transaction. In the capital markets space, which encompasses mutual funds and equity transactions, a minimal MDR of 0.02 percent will apply, also capped at an upper ceiling of Rs 300.
Complete Relief for Small Enterprise Owners
Micro and small merchants have been comprehensively shielded from the new charge. Retailers operating under the P2PM classification whose monthly collections through QR codes do not exceed Rs 1 lakh will pay zero MDR across all transactions. This safeguard ensures that neighbourhood vendors and smaller shops face no operational cost increases.
Consumer Protection and Regulatory Mandates
The Ministry of Finance has clarified that the MDR framework is strictly an enterprise-side operational cost intended for the merchant ecosystem. Banking institutions and digital wallet applications, such as Google Pay and PhonePe, are barred from levying platform fees, convenience charges, or hidden deductions on end users. In addition, merchants are expressly prohibited from passing these costs onto buyers. With peer-to-peer (P2P) transfers and commercial transactions up to Rs 2,000 holding a 0 percent rate, approximately 96 percent of all retail merchant transactions across the country will remain untouched by the changes.
