The National Payments Corporation of India (NPCI) is set to introduce a revised Merchant Discount Rate (MDR) framework for UPI from 15 October, 2026, but the changes will not apply to person-to-person transactions, including salary transfers and individual remittances.
Under the revised framework, a 0.4 per cent MDR will apply to eligible merchant UPI transactions above Rs 2,000, with the charge payable by merchants and capped at Rs 300 per transaction. For employees and individual users, however, salary credits, P2P transfers and remittances will continue to remain outside the MDR structure.
This means employers using UPI for salary-related transfers will not face the proposed MDR on those transactions, while employees will continue to receive salaries and make individual UPI transfers without an MDR being applied to the transaction.
The proposed framework is focused on the merchant side of the payments ecosystem. Merchants will not be permitted to pass the MDR on to customers, while UPI application providers will not be allowed to impose additional platform fees linked to the MDR.
For the workforce, the distinction between merchant and individual transactions is significant as UPI has become part of everyday financial activity, including salary payments, reimbursements, transfers to family members and other personal payments. These transactions will remain outside the proposed charge structure.
The framework also provides exemptions for smaller merchants. Businesses collecting up to Rs 1 lakh per month through UPI QR codes will remain exempt, while UPI QR payments in rural and semi-urban areas will continue to be free.
Certain essential services, including railways, telecom, fuel and insurance, will attract a flat Rs 5 fee on transactions above Rs 2,000, according to the details provided.
The revised framework comes as UPI continues to play a growing role in India’s digital payments ecosystem. NPCI data shows that UPI processed 24.5 billion transactions worth around Rs 29.82 lakh crore in August 2026, with 752 banks live on the platform.
While the proposed MDR introduces a cost for a segment of higher-value merchant transactions, its exclusion of P2P payments means employees and other individual users will continue to use UPI for salary transfers and personal payments without the new merchant charge.
