The Union government will introduce a 0.4 percent Merchant Discount Rate on Unified Payments Interface transactions exceeding Rs 2,000 from October 15, 2026. The levy will apply strictly to Person-to-Merchant payments, while all peer-to-peer money transfers and retail transactions up to Rs 2,000 will remain entirely free of charge. For high-value commercial payments of Rs 75,000 and above, the fee has been capped at Rs 300 per transaction, ensuring that costs do not escalate linearly with larger bill amounts.
Relief for Small Retailers and Everyday Consumers
The merchant discount rate represents the service charge deducted before funds settle into a seller’s account. By restricting the charge to ticket sizes above Rs 2,000, authorities have insulated day-to-day retail activity from additional overheads. Low-value transactions account for more than 95 percent of all merchant payments carried out over the network. Under a gazette notification issued on September 14, commercial banks and payment service providers are explicitly barred from imposing any direct or indirect fees on UPI or RuPay debit card payments up to the Rs 2,000 limit. Transfers between private individuals will face no charges regardless of the amount sent.
Legal Backing and Industry Readiness Window
The regulatory shift rests on a recent amendment to Section 10A of the Payment and Settlement Systems Act of 2007, passed by Parliament during the Monsoon Session in August. This legislative update creates an enabling statutory framework to levy service fees on notified digital payment modes. Setting the rollout date for mid-October provides a transition period for retail aggregators, fintech firms, software vendors, and corporate entities to reconfigure their billing software, enterprise accounting ledgers, and settlement pipelines. The pricing model follows recommendations submitted by a 22-member panel composed of banking executives, industry delegates, and digital payment providers tasked with balancing commercial viability against network growth.
Sustained Expansion Across Domestic and Overseas Markets
The introduction of the levy arrives amid exponential volume growth across India’s domestic payments architecture. Digital clearing data shows that the network handled 2,366 crore individual transactions in July 2026, totaling nearly Rs 29.9 lakh crore in gross settlement value. Over a ten-year span, annual UPI turnover grew from approximately Rs 7,000 crore in the 2016-17 financial year to roughly Rs 314 lakh crore in 2025-26. Beyond domestic borders, the system has built an active presence across multiple jurisdictions, including France, Singapore, Mauritius, Bhutan, Nepal, Qatar, the United Arab Emirates, Sri Lanka, Cambodia, and Greece, with Uzbekistan recently joining the global operational footprint.
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