UPI MDR Explained: What Changes, What Stays Free in 2026
UPI MDR Framework: What Has Changed and What Remains Free
The Big News
UPI remains free for all person-to-person transactions.
What Stays Free
The following categories continue to remain free under the UPI ecosystem:
- P2P transfers: Always free
- Merchant payments up to ₹2,000: Free
- Small merchants: Zero MDR
What Changes
The new framework introduces the following changes for certain merchant transactions:
- 0.4% MDR on merchant payments above ₹2,000
- Cap of ₹300 on ₹75,000+ transactions
Special Sectors
Railways, telecom, insurance, fuel and agriculture transactions above ₹2,000 will attract a flat MDR of ₹5.
Capital Markets
Mutual funds and securities transactions will attract an MDR of 0.02%, capped at ₹300.
Will Customers Pay?
No.
MDR is within the merchant ecosystem. Customers should not be charged.
96% of Transactions Remain Unaffected
Only approximately 4% of merchant transactions attract MDR.
As a result, 96% remain unchanged.
Why Introduce MDR?
The framework aims to support:
- Banks
- Payment providers
- Infrastructure growth
- Long-term UPI sustainability
Our Expert View
For most Indians, the impact is minimal.
A sustainable revenue model can strengthen UPI without hurting consumers or small businesses.
An important factor to monitor is whether merchants absorb these costs or adjust pricing over time.
Key Takeaway
UPI is still free for individuals.
The change mainly affects certain large merchant transactions.