India is ending free merchant payments on its national real-time rail. On September 15, 2026, the National Payments Corporation of India (NPCI) set a merchant discount rate (MDR) of 0.40% on person-to-merchant UPI transactions above ₹2,000, effective October 15, 2026. Payments to merchants below that threshold, and all person-to-person transfers, remain free.
The new fee schedule
| Transaction | Fee | Notes |
|---|---|---|
| Person to person | None | Any amount |
| To a merchant, up to ₹2,000 | None | More than 95% of merchant volume |
| To a merchant, above ₹2,000 | 0.40% | Capped at ₹300 per transaction |
| Railways, telecom, insurance, fuel | ₹5 flat | Above ₹2,000 |
| Capital markets | 0.02% | Capped at ₹300 |
Small merchants that receive up to ₹100,000 (1 lakh) a month through a UPI QR code are exempt. NPCI says the fee is needed to cover the cost of running the network, which it puts at about ₹20,000 crore a year, including bandwidth, fraud prevention, and technical support for banks.
Issuers get the largest share of the fee
NPCI does not keep the 40 basis points. They are split among the payer’s bank, the merchant’s acquirer, the UPI app that carries the payment, and that app’s partner bank. It is the first time the UPI chain has earned revenue tied directly to merchant volume.
The threshold matters more than the rate
At 0.40%, the fee is still far below what a card costs an Indian merchant. The pressure point is the ₹2,000 threshold, which puts the fee on large tickets: electronics, furniture, travel, and services. Those are exactly the segments where cards had held on to market share, and where the free rail had gained ground fastest.
NPCI also announced a dedicated fund to subsidize payment infrastructure and equipment for small merchants in tier 3 to 6 cities and underserved regions. The fee thus pays for the network’s own expansion, a common model for domestic schemes.
The fee reshapes the economics for aggregators, apps, and merchants
- Indian payment aggregators finally earn revenue on volume, not just on value-added services
- payment apps get a business model that rests on something other than government subsidies
- merchants with high average tickets will compare the cost of UPI and cards again
- foreign providers selling payment acceptance in India can compete on price again
India’s Finance Ministry is preparing a monitoring system to make sure merchants do not pass the fee on to customers, according to a Press Trust of India report picked up by the Indian press. The ministry has also opened talks with payment aggregators. Public debate is less about the principle than about the threshold: at ₹2,000, the fee reaches part of organized retail without touching everyday payments.
India sets a useful precedent for other countries that run a free instant payment rail. A public network can reach global scale without fees, but sooner or later someone has to pay for it. India’s answer is to make large tickets pay rather than everyone.