UPI Going Paid? 0.4% MDR May Hit Your Big Payments

The government may end free UPI incentives and introduce a 0.4% merchant fee on UPI transactions above ₹2,000. If merchants pass this cost to you, your everyday large UPI payments — rent, EMIs, groceries — could get more expensive.

Here's what happened: The Indian government is likely to withdraw the BHIM-UPI and RuPay debit card incentive scheme that has kept UPI transactions free for merchants since 2016.. A new pricing framework proposes a 0.4% Merchant Discount Rate (MDR) specifically on UPI transactions exceeding ₹2,000 in value.. The zero-MDR mandate introduced in 2020 eliminated merchant fees on UPI and RuPay, but removal of government subsidies is now pushing the system toward a paid model..

What you should do: Check whether your regular high-value UPI payments — rent, school fees, utility bills — cross the ₹2,000 threshold and budget for potential surcharges of up to 0.4%.. Ask merchants explicitly whether they will absorb MDR or pass it to you before making large UPI payments, just as you would ask about credit card surcharges today.. Compare payment options — if a merchant adds a UPI surcharge on large amounts, net-banking NEFT/IMPS transfers directly from your bank app may remain cheaper for big-ticket payments..

MDR rules apply to merchants, not to you directly — but merchants can legally pass the cost on. Always ask for a zero-surcharge payment option before handing over ₹2,000+ via UPI.

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