Finance Ministry: UPI stays free for all person-to-person payments and 96% of merchant payments
On 15 September 2026, the Finance Ministry clarified that under the new UPI framework, all person-to-person UPI transactions remain free and merchant payments up to ₹2,000 stay free, leaving about 96% of merchant transactions unaffected.
Summary
The Finance Ministry said a merchant discount rate (MDR) will apply only to specified merchant transactions above ₹2,000, and transactions under the zero-MDR framework for small merchants also remain free. It clarified that MDR is neither a tax nor a charge collected by the government or NPCI, but is shared among banks and payment app providers to sustain the UPI ecosystem. The framework was introduced under the Payment and Settlement Systems Act, 2007, after deliberations by the UPI Steering Committee.
Key facts
- Free
- All P2P UPI payments; merchant payments up to ₹2,000; zero-MDR small merchants
- Unaffected
- About 96% of P2M transactions
- MDR applies
- Only to specified merchant transactions above ₹2,000
- MDR is not
- A tax or a charge collected by government/NPCI
- Legal basis
- Payment and Settlement Systems Act, 2007
Practice MCQs 2 questions
Above what value will MDR apply to specified UPI merchant transactions under the new framework?
Show answer
Correct answer: D — ₹2,000
MDR applies only to specified merchant transactions above ₹2,000; payments up to ₹2,000 stay free.
Under which Act was the new UPI framework introduced, according to the Finance Ministry?
Show answer
Correct answer: B — Payment and Settlement Systems Act, 2007
The framework was introduced under the Payment and Settlement Systems Act, 2007, after deliberations by the UPI Steering Committee.