New Delhi, Sept. 21 -- Come 15 October, a 0.4% merchant discount rate (MDR) will apply to UPI merchant payments. Person-to-person (P2P) transactions, person-to-merchant (P2M) payments below Rs.2,000, and small vendors receiving up to Rs.1 lakh a month will remain exempt. But high-value merchant payments will now generate fee revenue for payment providers.

The move addresses a widening funding gap in UPI infrastructure: the government allocated Rs.437 crore in fiscal year 2026 (FY26) against an estimated network operating cost of Rs.20,000 crore. However, it has also raised questions over whether fee-sensitive businesses will steer customers towards other payment instruments, whether the benefits will accrue disproportionately to the larg...