The government has announced new MDR charges on UPI payments above ₹2,000. The new framework will start from October 15, 2026. However, these charges will not apply to every merchant. Only selected merchants receiving eligible payments will pay the MDR charge.
Question 1: Will customers have to pay this charge?
Answer: No, customers will not pay this charge. According to government guidelines, MDR applies only to Person-to-Merchant (P2M) transactions. If a customer makes a payment above ₹2,000, the customer will not pay any charge. Only selected merchants will face this charge.
Question 2: How much MDR charge will apply?
Answer: If a merchant receives a payment above ₹2,000, the merchant will pay 0.40% MDR. However, the maximum MDR limit will remain ₹300. No one can collect more than ₹300 as MDR.
Question 3: Which merchants will receive exemption?
Answer: Small merchants will remain outside MDR charges. They will not pay any charge while receiving payments, whether the amount stays below or crosses ₹2,000.
Question 4: How will authorities identify small merchants?
Answer: Government guidelines classify P2PM users, shopkeepers and small merchants separately. If these merchants receive ₹1 lakh monthly through QR code payments, they will not pay MDR.
Question 5: Will large merchants pay MDR on payments below ₹2,000?
Answer: No, MDR will not apply to payments below ₹2,000. This rule applies to both large merchants and small merchants. No merchant will pay charges for such payments.
Question 6: How many merchants will face the impact?
Answer: The government stated that large merchants receiving payments above ₹2,000 represent only 5% of total UPI payments. Around 95% merchants are small businesses and will not face this charge.
Question 7: Will vegetable sellers, tea shops and small businesses face any impact?
Answer: No, small businesses will not face any impact. Under the P2PM system, merchants earning up to ₹1 lakh monthly through QR payments will have zero MDR even on payments above ₹2,000.
Question 8: Can merchants recover MDR charges from customers?
Answer: No, this will be completely illegal. Government and banks have clearly instructed merchants not to collect MDR from customers. Payment apps like Google Pay, PhonePe and Paytm also cannot charge users any platform fee.
Question 9: Why did the government introduce this MDR model?
Answer: The model aims to support UPI infrastructure, increase server capacity and prevent cyber fraud. Banks and fintech companies spend heavily on maintaining these systems. The new model will provide financial support for this infrastructure. Also, 5% of MDR collections will go into a special fund for expanding digital infrastructure in rural areas and tier-3 cities.
Question 10: What happens if a small merchant suddenly receives ₹1 lakh?
Answer: Merchants receiving up to ₹1 lakh monthly payments will remain exempt from MDR. Therefore, a sudden ₹1 lakh payment will not attract charges. However, if payments cross ₹1 lakh continuously for three months, MDR may apply.
Question 11: Will insurance, recharge, railway and fuel sectors have different MDR charges?
Answer: Yes, some sectors will have separate MDR rules. These merchants will pay a maximum ₹5 charge for payments above ₹2,000. The rule applies to telecom recharges above ₹2,000, insurance premiums above ₹2,000, railway tickets and petrol-diesel payments above ₹2,000.
Question 12: Will UPI MDR be higher than cards or wallets?
Answer: No, the government says UPI MDR will remain lower than charges applied on credit cards, debit cards and wallets.
