The National Payments Corporation of India (NPCI) will introduce a merchant discount rate (MDR) on select high-value Unified Payments Interface (UPI) transactions starting October 15, ending a decade of free payments on the platform, according to inc42.com. The MDR will apply to person-to-merchant (P2M) payments above ₹2,000, set at 0.4% and capped at ₹300 for transactions of ₹75,000 and above. This charge will be levied on merchants, with banks instructed to prevent passing the cost to customers.
The MDR framework exempts person-to-person (P2P) payments and small merchants receiving up to ₹1 lakh monthly via QR-code transactions from charges. The revenue generated from MDR will be shared among issuer banks, payment service providers, and app providers. This new revenue model aims to support the growing infrastructure, cybersecurity, and operational costs associated with the increasing volume of UPI transactions, which currently number in the billions each month.
This policy shift acknowledges the need for sustainable monetisation of UPI, which has long operated without direct charges despite record transaction volumes. For fintech companies, the MDR introduces a predictable revenue stream that could enhance investment in fraud detection, encryption, and rural payment infrastructure. The move is significant in the Indian digital payments landscape, where UPI has been a key driver of financial inclusion and digital commerce.
The MDR implementation is scheduled for October 15, marking a major change in UPI’s operational model. NPCI’s decision reflects the evolving economics of digital payments in India, aiming to balance infrastructure costs with continued accessibility for users and merchants.