Starting October 15, 2026, India's Unified Payments Interface will introduce a Merchant Discount Rate on selected person-to-merchant transactions above ₹2,000. The standard UPI MDR is set at 0.4% for eligible P2M payments, while merchant charges are capped at ₹300 per transaction. Once a payment reaches ₹75,000, the charge stops rising. Person-to-person transfers and small merchant transactions remain exempt, keeping most UPI payments free for consumers.
The fee is not added to the customer's payment. A person paying ₹5,000 at a shop will not see an extra charge; instead, the merchant accepting the payment bears the processing cost. This structure is central to the policy change and is intended to preserve UPI's consumer-facing free experience while creating a revenue mechanism from larger merchant transactions.
Zerodha co-founder Nithin Kamath backed the National Payments Corporation of India's new MDR as "probably inevitable" given UPI's widespread adoption, but warned that its application to capital market transactions could quietly reshape India's zero-brokerage trading model. A separate capital market MDR of 0.02% also takes effect from October 15. Kamath proposed a lower cap of ₹5 to ₹10 instead of the current ₹300 cap, arguing that quarterly settlement rules add another layer of cost exposure for brokers.
Currently, Zerodha and other brokers allow customers to add funds via UPI at no cost, alongside IMPS, while net banking transfers typically carry a small fee around ₹9. The new charges could alter the economics behind free UPI-based fund transfers and pressure the zero-brokerage structure that has supported India's retail trading boom.
