NPCI imposes 0.4% fee on large UPI payments, funding digital infrastructure

The National Payments Corporation of India (NPCI) will implement a 0.4% Merchant Discount Rate (MDR) on high-value UPI transactions starting October 15, 2026. This new fee applies specifically to merchant payments exceeding ₹2,000 ($21). Merchants will pay the charge, while consumers continue to use the service for free.

The policy change ends a long-standing zero-fee era for the digital payment system. All person-to-person transfers and merchant payments under the ₹2,000 threshold remain free of charge. These exempt transactions currently represent over 95% of total UPI volume.

The NPCI will cap the new fee at ₹300 per transaction. This revenue stream will fund banking infrastructure, technological innovation, and cybersecurity measures. The move provides a fresh income source for major payment platforms including Walmart’s PhonePe and Google Pay.