Big Change in UPI Payments: MDR May Return for Transactions Above ₹2,000
Big Change in UPI Payments: MDR May Return for Transactions Above ₹2,000
18 July, 2026: The Central Government is considering bringing back the Merchant Discount Rate (MDR) on certain UPI merchant transactions worth ₹2,000 or more, a move that could increase digital payment costs for large businesses. While discussions are underway, no final decision has been taken yet.
The proposal is aimed only at merchant UPI transactions (Person-to-Merchant or P2M) and will not apply to regular person-to-person (P2P) UPI transfers. This means users sending money to family or friends through UPI are unlikely to face any direct charges if the proposal is approved.
According to reports, the government is evaluating whether MDR should be reintroduced for payments of ₹2,000 and above made to large merchants. MDR is the fee that merchants pay to banks or payment service providers for processing digital transactions. It helps cover the costs of payment infrastructure, transaction processing, and related services.
Sources suggest the MDR could be capped at 0.5% for eligible transactions. For instance, a ₹10,000 UPI payment at a qualifying merchant could attract an MDR of ₹50. However, it is yet to be decided whether the cost will be borne entirely by merchants or reflected indirectly in the prices of goods and services.
The proposal is expected to provide relief to small businesses. Merchants with an annual turnover of up to ₹1.5 crore are likely to remain exempt, while the charge may apply only to larger businesses. The exact turnover threshold, transaction limit, and implementation details will be finalised after the government takes a decision.
For consumers, there is no immediate reason to worry. Current indications suggest that the proposed MDR would not be charged directly to customers making UPI payments. Instead, it would be collected from eligible merchants. However, businesses could eventually factor the additional expense into their pricing, leading to an indirect impact on consumers.
The government is expected to take a final call on the proposal in the coming weeks. Until an official notification is issued, the existing UPI payment system will continue without any MDR on merchant transactions.
