Most merchants will pay a fee on UPI payments above Rs 2,000

From October 15, most shops will pay 0.4 per cent on bigger UPI payments, capped at Rs 300. Customers and small merchants pay nothing.

A shop that is paid Rs 2,001 by the Unified Payments Interface (UPI) can keep less than one that’s paid Rs 2,000 when a new merchant fee starts on October 15, India Today's calculation from the operator's published rates shows.

The fee, known as the merchant discount rate (MDR), is what a shop pays its bank on a payment. In answers to frequently asked questions from the National Payments Corporation of India (NPCI) dated September 15, most merchants will pay 0.4 per cent on payments above Rs 2,000 and nothing up to that line. On a Rs 2,001 payment, that comes to about Rs 8, leaving the shop about Rs 1,993.

The Rs 2,001 case is the edge, not the rule. Payments of up to Rs 2,000 make up more than 95 per cent of payments to merchants by number, according to the NPCI, which does not specify the period. Above that line, the fee is capped at Rs 300. Customers, the public sector company said, will not be charged, and payments between people, including transfers to family and between a person's own accounts, will stay free.

On a Rs 3,000 payment, a merchant pays its bank Rs 12, and on Rs 50,000 it pays Rs 200, according to worked examples in NPCI's answers. The fee stops rising at Rs 300, which a shop reaches on a payment of Rs 75,000, so on a Rs 1 lakh payment it pays Rs 300, not the Rs 400 that 0.4 per cent would come to, the NPCI said.

By our calculation, every payment from Rs 2,001 to Rs 2,008 leaves a shop with less than a Rs 2,000 payment would.

Per the corporation, merchants cannot pass the fee on to customers, and UPI apps may not add a platform fee of their own.

Vendors who receive up to Rs 1 lakh a month through UPI QR codes directly into their accounts, a category called P2PM (person-to-person merchant), will continue with zero MDR. A vendor taking more than Rs 1 lakh a month for three months in a row moves into the paying category, according to the NPCI.

Some sectors pay a flat Rs 5 on payments above Rs 2,000 instead of a percentage. The corporation names railways, telecom, insurance, and fuel in the "among others" tier, and separately lists insurance premiums, fuel at petrol pumps, and utility bills such as electricity, water and piped gas.

Payments to stockbrokers, securities dealers, and mutual funds carry a lower rate of 0.02 per cent, also capped at Rs 300. Recurring payments set up as UPI mandates, such as monthly bills, streaming subscriptions, and regular investments, carry no prescribed MDR. The FAQs do not say which rule applies to a mutual fund investment paid by mandate.

The MDR "is distributed only amongst the UPI ecosystem, to further invest in infrastructure resiliency, innovation, cybersecurity" and customer service, according to the NPCI's answers. The corporation also said it plans a fund to support small merchants, with the details to be settled with the Reserve Bank of India (RBI).

UPI carried about 1,551 crore payments to merchants in August 2026, worth Rs 8.95 lakh crore. Those payments made up 63.3 per cent of all UPI payments by number but 30 per cent by value.

The average payment to a shop that month was Rs 577, a DIU calculation from NPCI data shows, against Rs 2,319 for a transfer between people. An average cannot show how many shop payments cross Rs 2,000.

Of the 29 named kinds of shop in NPCI's merchant data, only two averaged above Rs 2,000 in August 2026: stockbrokers, at Rs 7,569, and debt collection agencies, at Rs 3,441, according to our analysis. Groceries averaged Rs 217 and fast food Rs 122, by the same analysis.

The two above the line made up 1.9 per cent of merchant payments by number and 15.4 per cent by value. Another 19.2 per cent of merchant payments fall in a category the NPCI does not name.

A figure that has appeared in coverage of the fee — that only four per cent of merchant payments are above Rs 2,000 — does not appear in the Finance Ministry's statement of August 8. The ministry said the "vast majority of the transactions will remain free of charge for merchants on UPI", without giving a share.

The figure appeared in a report on August 4, which said such payments were "just four per cent of the transaction volume" in a passage on brokerage estimates, without naming a source for it. The NPCI's own figure, that more than 95 per cent of merchant payments are Rs 2,000 or less, puts the share above the line at less than five per cent.

The NPCI's answers don't word the Rs 2,000 line the same way. One says small-value payments "up to Rs 2,000" are unaffected. Another says "any transaction under Rs 2,000 incurs no MDR". It is silent on a payment of exactly Rs 2,000. NPCI's own worked example charges nothing on a Rs 2,000 payment, which is the reading this story uses.

School and college fees are not given a figure. Payments above Rs 2,000 "benefit from flat-fee structures or capped processing rates", the FAQ says, without saying which or how much.

The answers also cite no circular number, and describe the fee as "discussed in this amendment", without naming the document being amended.

The FAQ's figure for August also differs from NPCI's own statistics. The FAQ says UPI processed payments "valued at Rs 29.9 lakh crore in August 2026"; NPCI's monthly statistics put the figure at Rs 29.82 lakh crore.

The fee starts on October 15. Until the NPCI says more, what a school pays and whether a Rs 2,000 payment is free rest on its answers to frequently asked questions.

Data note: NPCI's answers to frequently asked questions on MDR, dated September 15, 2026; NPCI UPI statistics for August 2026, taken September 17, 2026. Fees on sample payments and average payment sizes are DIU calculations; averages don't show how many payments exceed Rs 2,000.