Perspective: New Rules for UPI Transactions | 16 September, 2026

UPI has changed the way India pays. From buying vegetables from a street vendor, to grocery shopping or even splitting a restaurant bill with a friend to paying a large merchant - UPI has made digital payments quick, convenient and, for the user, essentially free. Now, a new framework governing Merchant Discount Rate, or MDR, is set to change the economics of some UPI transactions. But before we get into the details, let us clear up the biggest question that many users may have: Is UPI becoming chargeable? The answer is - not for person-to-person transactions. So, if you are transferring money to another individual through UPI, that transaction will continue to remain completely free — irrespective of the amount you transfer.There is also no change for the overwhelming majority of everyday merchant payments. Merchant payments of up to ₹2,000 will continue to remain free of MDR. And there is another important protection for small businesses. Small merchants receiving up to ₹1 lakh a month through UPI QR codes under the specified P2PM category will continue to enjoy zero MDR on their transactions. So, then the next question is: How much of the UPI ecosystem is actually affected? According to the framework, around 96% of all person-to-merchant transactions will remain unaffected. MDR would apply only to a limited set of specified merchant transactions above ₹2,000. And this is where the terminology becomes important. The government says MDR is not a tax. It is not money collected by the Government or NPCI from the customer. It is a charge within the payment ecosystem, distributed among participants such as banks and payment application providers. Under the new framework, a 0.4% MDR will apply to specified merchant transactions above ₹2,000, with a cap of ₹300 for transactions of ₹75,000 and above. There are also separate provisions for certain sectors. For essential and thin-margin sectors such as railways, telecommunications, insurance, fuel and agricultural inputs, transactions above ₹2,000 will attract a flat MDR of ₹5. And for certain capital-market transactions, including mutual funds, securities and stockbroking-related payments, the rate has been set at 0.02%, capped at ₹300. But perhaps the most important point from a consumer perspective is this: The customer does not pay MDR. Banks have been advised to ensure that merchants do not pass this cost on to customers, while UPI application providers will not be permitted to impose platform fees or hidden charges.The larger objective that’s being cited behind this framework is that UPI today operates at a massive scale. The challenge is to ensure that an infrastructure used by millions every day remains financially sustainable, while retaining the fundamental benefit that made UPI so widely adopted - easy and free payments for individuals and protection for small merchants. The framework also provides for a dedicated fund for small merchants, with an amount equivalent to 5% of total MDR collections going towards wider UPI acceptance and sustained usage among small businesses. So, what does this mean in practical terms? Will the new MDR framework make UPI more sustainable? How will the money collected through MDR flow through the payment ecosystem? And what does it mean for merchants, banks, payment apps and the future expansion of UPI? Guests: 1- Sanjay Saxena, Former CFO, NPCI 2- Dr. Utpal Chakraborty, Founder & Chief Scientist, GAHNA AI Research Lab Anchor: Teena Jha Producer: Sagheer Ahmad Guest Coordinator: Deepti Vashisht, Vinod Kumar Singh, Paras Kandpal Watch the other videos on our playlist:    • Perspective   Sansad Television is the Parliamentary channel of India. It was created in 2021 by merging Lok Sabha Television and Rajya Sabha Television. Follow us on: -X: https://x.com/sansad_tv -Insta:   / sansad.tv   -FB:   / sansadtelevision   -WhatsApp: https://whatsapp.com/channel/0029VanO... -linkedin:  / published   Visit Sansad TV website: https://sansadtv.nic.in/