New UPI Charges From October 15: Who Will Pay and What Changes for Users

India’s widely used UPI payment system is set for a major change from October 15, 2026, with the National Payments Corporation of India (NPCI) introducing a new Merchant Discount Rate (MDR) framework for certain transactions above ₹2,000.

The announcement has triggered confusion among UPI users, with many wondering whether they will now have to pay extra for sending money, shopping, paying bills or buying fuel.

However, the new framework does not introduce a general charge on consumers. The charges are primarily levied within the merchant payment ecosystem, with different rates depending on the type of transaction.

Will UPI Users Have to Pay More?

For ordinary users, UPI payments will continue to remain free.

Person-to-person transactions will remain free regardless of the amount transferred. So, if you send ₹10,000 to a friend or family member, neither the sender nor receiver will have to pay an MDR charge.

Payments made to merchants up to ₹2,000 will also remain free under the new framework.

The government has also advised banks to ensure that merchants do not pass the MDR cost on to customers, while UPI applications are prohibited from imposing platform fees or hidden charges related to the new framework.

What Is the New 0.4% UPI Charge?

For merchant payments above ₹2,000, a 0.4% MDR will generally apply from October 15.

The charge is paid by the merchant rather than the customer. For high-value merchant payments above ₹75,000, the MDR is capped at ₹300 per transaction.

For example, if a customer buys a ₹30,000 mobile phone through UPI, the applicable MDR at 0.4% would be ₹120. The merchant, rather than the customer, bears that charge.

Similarly, on a ₹6,000 restaurant bill, the MDR would work out to ₹24, while the customer would continue to pay the listed ₹6,000.

Petrol Pump UPI Payments Face a Different Rule

Fuel payments above ₹2,000 fall under a special category.

Instead of the standard 0.4% MDR, fuel transactions above ₹2,000 will attract a flat ₹5 MDR, according to the NPCI framework. Fuel payments below ₹2,000 will continue to carry zero MDR.

This has sparked concern among petrol pump dealers because fuel retailers operate on relatively narrow margins.

Petrol pump dealers in several parts of India have reportedly threatened to stop accepting UPI payments of ₹2,000 and above if the MDR exemption they are seeking is not granted. Dealers have argued that even a ₹5 charge can add to their operating costs when margins are already limited.

Which Other Transactions Have Special Charges?

The new framework includes different rates for different categories.

• Person-to-person UPI: No MDR, regardless of transaction value.
• Merchant payments up to ₹2,000: No MDR.
• General merchant payments above ₹2,000: 0.4% MDR, capped at ₹300 for transactions above ₹75,000.
• Fuel, railways, telecom, insurance and certain other essential services: ₹5 MDR on transactions above ₹2,000.
• Mutual funds, securities, stockbrokers and dealers: 0.02% MDR, capped at ₹300.
• UPI AutoPay/mandate transactions: Certain recurring payments will not attract MDR under the framework.

Why Is NPCI Introducing MDR on UPI?

The new framework is aimed at creating a revenue mechanism within the UPI ecosystem as transaction volumes continue to expand.

According to the government, the revenue will be distributed among participants in the payment ecosystem, including banks and payment application providers, to support the operation and expansion of UPI infrastructure.

UPI has become one of India’s largest digital payment systems. NPCI data shows that UPI processed more than 24.5 billion transactions in August 2026, with a transaction value of about ₹29.82 lakh crore.

Will Small Merchants Be Affected?

The framework includes protection for small merchants.

Small merchants can continue receiving UPI payments without MDR up to a specified monthly threshold, with NDTV reporting an exemption for eligible small merchants receiving up to ₹1 lakh per month.

The government has also indicated that the ₹2,000 threshold is intended to keep the overwhelming majority of person-to-merchant transactions free.

What Does This Mean for Everyday UPI Users?

For most people, there will be little immediate change when making routine UPI payments.

Sending money to family or friends will remain free. Small purchases below ₹2,000 will remain free, and even when a merchant payment exceeds ₹2,000, the MDR is designed as a merchant-side charge rather than a fee added to the customer’s bill.

The biggest immediate concern is among businesses that handle frequent high-value UPI payments, particularly sectors such as fuel retail where the ₹5 charge applies to transactions above ₹2,000.

The new framework will take effect on October 15, 2026, giving banks, payment aggregators, fintech companies and businesses time to update their systems.

Bottom Line

UPI is not becoming a paid service for ordinary users.

From October 15, the new MDR framework will introduce charges within parts of the merchant ecosystem, mainly for merchant transactions above ₹2,000. Person-to-person transfers remain free, while certain essential services such as fuel will have a special ₹5 charge above the threshold.

For consumers, the key question will be whether merchants continue to absorb the cost as required under the framework or whether disputes over MDR lead to changes in how some businesses accept digital payments.