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Informist, Tuesday, Sept. 15, 2026

 

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--Govt: UPI payments to remain free for person-to-person transactions 
--Govt: Merchant discount rate of 0.4% on transactions above INR 2,000 
--Govt: Merchant fee capped at INR 300 for transactions above INR 75,000 
--Govt: Essential sectors to pay flat merchant fee of INR 5 per transaction 
--Govt:0.02% merchant fee on payment to MF, securities, stock brokers, dealers 
--Govt: Reduced rate for capital mkt transactions to promote fincl inclusion 
--Govt:No fee on small merchants getting up to INR 100,000/mo via UPI QR code 
--Govt: UPI app providers banned from levying platform fees or hidden charges 
--Govt: Data shows 4% merchant transactions to be impacted by merchant fee 
--Govt: To set-up fund to promote use of UPI by small merchants 
--NPCI: Merchant fee of INR 5 per transaction on UPI payments above INR 2000 
--NPCI: Fee to be levied on merchants such as railways, telecom, insurance 
--NPCI: UPI transactions below INR 2,000 remain completely free 
--NPCI: Merchant discount rate framework effective from Oct 15

 

MUMBAI – Merchant payments through the Unified Payments Interface above INR 2,000 will attract a merchant discount rate of 0.4% from Oct. 15, while person-to-person transactions will remain completely free, the government said in a press release Tuesday. The merchant discount rate will apply only to specified person-to-merchant transactions above INR 2,000, with the rate capped at INR 300 for transactions of INR 75,000 and above, according to the release.

 

In a post on social media platform X, National Payments Corp. of India said the revised framework will apply to eligible merchant payments above the threshold. The announcement marks a shift from the existing zero-merchant discount rate regime for merchant transactions.

 

The government said the new framework will have no impact on person-to-person UPI payments, irrespective of the amount transferred. No transaction fee, platform fee, or other charge can be imposed on individuals for sending or receiving money through UPI. For merchants, payments up to INR 2,000 will remain free of the merchant discount rate. Small merchants, including street vendors and neighbourhood shops, receiving up to INR 100,000 a month through UPI QR codes under the person-to-person-merchant category will also continue to enjoy a zero merchant discount rate on all transactions. As a result, around 96% of merchant transactions are expected to remain unaffected, the government said.

 

The government said transactions above INR 2,000 in essential and thin-margin sectors, including railways, telecommunications, insurance, fuel, and agricultural inputs, will instead attract a flat merchant fee of INR 5 per transaction. NPCI also specified railways, telecom, and insurance among the merchant categories covered by the flat fee.

 

For capital-market transactions, including payments to mutual funds, securities firms, stockbrokers and dealers, the merchant discount rate will be 0.02%, capped at INR 300 per transaction. The government said the lower rate is aimed at promoting retail participation and financial inclusion in formal financial markets.

 

The government clarified that the merchant discount rate is not a tax or a charge collected by the government or NPCI. Instead, it will be distributed among participants in the payment ecosystem, including banks, payment service providers, and UPI application providers, to support the operation and expansion of the UPI ecosystem. UPI application providers will be prohibited from levying platform fees or hidden charges on users, while banks have been advised to ensure that merchants do not pass the merchant discount rate on to customers. Individuals will continue to have unlimited free use of UPI, with no monthly quotas or tiered caps.

 

The government said data analysis showed that only about 4% of merchant transactions would attract a merchant discount rate, leaving approximately 96% unaffected because they are either below INR 2,000 or covered by the zero-merchant discount rate framework for small merchants. To support smaller businesses, the government will establish a dedicated fund to promote UPI adoption among small merchants. An amount equivalent to 5% of total merchant discount rate collections will be contributed to the fund, which will support wider UPI acceptance and sustained usage among small businesses.

 

NPCI said the revised framework is intended to support the commercial sustainability of the UPI ecosystem while keeping payments free for consumers. The government said revenue from larger merchant transactions will support banks, payment service providers, and UPI application providers in expanding payment infrastructure, including in rural and semi-urban areas.

 

The framework has been introduced under the Payment and Settlement Systems Act, 2007, following deliberations by the UPI Steering Committee on applicable rates, operational arrangements and consumer safeguards, the government said.  End

 

Reported by Kabir Sharma

Edited by Shubhayan Bhattacharya

 

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