India will introduce new UPI merchant fees from October 15, 2026, under a revised Merchant Discount Rate (MDR) structure. The new system will apply to some person-to-merchant (P2M) payments above ₹2,000. The move has already sparked debate among merchants, digital payment users and industry observers.
UPI Merchant Fees 2026 Explained
Under the new system, eligible P2M UPI transactions above ₹2,000 will attract a fee of 0.4 percent. The fee will have a maximum limit of ₹300 per transaction. However, the new charge will not apply to person-to-person (P2P) UPI transfers.
The revised structure will also keep small transactions up to ₹2,000 outside the fee system. In addition, some low-volume merchants will receive exemptions. These measures aim to protect small businesses and everyday digital payments.
For example, a customer paying ₹2,500 at an eligible shop could trigger the new merchant fee. However, a person sending the same amount to another individual through a P2P transaction will continue to use UPI without this merchant charge.
Why Are Merchants Concerned?
The new UPI merchant fees have raised questions about the difference between P2M and P2P payments. BharatPe co-founder Ashneer Grover questioned the logic behind the distinction and argued that payment infrastructure costs remain similar across transaction types.
Critics say the new system could increase costs for small businesses. They also fear that some merchants may try to recover those costs by increasing prices for customers.
At the same time, supporters of the revised system argue that UPI needs a sustainable funding model as usage continues to grow across India.
NPCI Explains the New Fee Structure
The National Payments Corporation of India (NPCI) says the fees will help support UPI infrastructure and cybersecurity. The funds could also support further expansion of digital payments in smaller towns and cities.
Importantly, officials have said consumers will not face a direct UPI fee under the new system. The charge applies within the merchant payment system rather than as a separate payment made by the customer.
Authorities have also stressed that merchants should not pass the fee directly to customers. The government wants UPI to remain affordable and widely accessible.
What It Means for UPI Users
For most people, everyday UPI payments of ₹2,000 or less will remain unaffected. Person-to-person transfers will also remain free under the revised structure.
However, larger payments at eligible merchants could change the cost structure for businesses. Therefore, customers may notice changes in pricing if some merchants decide to absorb the additional cost or adjust their prices.
UPI has become one of India’s most important digital payment systems. As a result, policymakers face the challenge of funding its growing infrastructure without reducing its popularity among consumers and businesses.
The new UPI merchant fees will begin from October 15, 2026. Their impact on merchants, customers and India’s digital payment ecosystem will become clearer after implementation.