Flat MDR for Essential Services and Low‑Margin Sectors in Updated UPI

The revised UPI framework introduces a flat Merchant Discount Rate of INR 5 per transaction for essential and low‑margin sectors when the payment amount exceeds INR 2,000. This includes railways, telecommunications, insurance, fuel, and agricultural inputs—areas that serve a broad public base.

By applying a uniform fee, the government aims to provide cost certainty for businesses that operate on thin margins, eliminating the variability of percentage‑based charges. The flat MDR is part of a broader strategy to keep digital payments affordable while still generating modest revenue for the payment ecosystem.

For transactions above INR 2,000 that do not fall under the essential‑service category, the standard MDR of 0.4 % will apply, with a maximum of INR 300 per transaction for amounts exceeding INR 75,000. This tiered approach ensures that high‑value commercial payments contribute proportionally to infrastructure development.

The Ministry clarified that the MDR is not a tax and is not collected by the government or NPCI. Instead, it is distributed among banks, payment service providers and UPI application providers to sustain and expand the UPI network, especially in rural and semi‑urban regions.

Banks have been directed to prevent merchants from passing on the MDR to customers, and UPI app providers are prohibited from adding any platform or hidden fees.

A dedicated fund, financed by 5 % of total MDR collections, will support initiatives that drive UPI adoption among small merchants, fostering wider acceptance, ongoing usage and deeper integration of micro‑enterprises into India's digital economy.