Important news has emerged for customers using UPI. The Union Finance Ministry clarified on Tuesday, September 16th, that there will be no charge for sending money from one person to another using UPI. Regardless of the transaction amount, personal payments, or P2P (person-to-person) transactions, will remain completely free. However, this will impact large merchant transactions. According to the ministry, this rule will come into effect on October 15th, 2026. Learn more.

What are the new UPI rules?
According to the new rules of the National Payments Corporation of India (NPCI), UPI payments made by an individual to a merchant exceeding Rs 2,000 will attract a 0.4 percent MDR. However, the maximum limit for this charge for a single transaction is Rs 300. For example, if a customer makes a transaction of more than Rs 2,000 and an MDR of 0.4 percent is applicable, then Rs 8 will be charged on the Rs 2,000 amount. This charge will be applicable on merchant transactions. There will be no direct charge from the customer for using UPI.

Will small merchants be affected?

The new system exempts small merchant transactions up to ₹2,000 from MDR. Such transactions are said to account for more than 95% of P2M (person-to-merchant) transactions in UPI. Therefore, this change will not directly impact consumers who make daily retail purchases or small transactions. Furthermore, the zero MDR rule will continue for small merchants eligible under P2PM. This includes small merchants who receive payments up to ₹1 lakh per month directly into their bank accounts via UPI QR codes. Certain services, such as railways, electronics, insurance, and fuel, have a fixed MDR of ₹5 per transaction for UPI transactions exceeding ₹2,000.

Expansion of Digital Payments
Meanwhile, NPCI has also proposed the creation of a separate fund for small merchants. This fund is expected to help expand digital payments in urban and smaller markets, as well as invest in security, cybersecurity, and new technologies. It has also been stated that the new MDR rate will be lower than the fees charged by other digital payment methods such as credit cards, debit cards, and digital wallets.

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