Starting October 15, 2026, Unified Payments Interface (UPI) transactions above Rs 2,000 made to large merchants will attract a Merchant Discount Rate (MDR) of 0.4%, according to reports. The National Payments Corporation of India (NPCI) has reportedly indicated that it does not currently plan to introduce a separate daily limit on repeated UPI payments, meaning users could potentially split a single bill into multiple smaller transactions to stay below the Rs 2,000 threshold.
The MDR is a fee that merchants pay to banks and payment service providers for processing digital payments. Under the new rule, large merchants—those with annual turnover above a certain threshold—will bear the 0.4% charge on UPI transactions exceeding Rs 2,000. Small merchants are expected to remain exempt, though exact eligibility criteria are still being clarified.
Because NPCI has not imposed a daily cap on the number of UPI transactions, a customer could theoretically split a Rs 6,000 bill into three Rs 2,000 payments to avoid the MDR. However, this practice may be impractical for many users and could attract scrutiny if done systematically. NPCI has not issued any formal guidance prohibiting such splitting as of now.
The move is part of a broader effort to sustain the UPI ecosystem, which has grown exponentially but currently operates without a revenue model for banks and payment companies. The 0.4% MDR is seen as a way to cover operational costs while keeping small-value transactions free. Stakeholders are awaiting detailed circulars from NPCI and the Reserve Bank of India (RBI) on implementation and exemptions.
