India's UPI Payment System to Introduce New Charges from October 2026

India's Unified Payments Interface (UPI) payment system is set to conclude its decade-long zero-fee period on October 15, 2026. Following this, a Merchant Discount Rate (MDR) of 0.4% will be introduced for person-to-merchant transactions valued above Rs 2,000 (approximately $24 USD).

The framework, announced by the Ministry of Finance, also stipulates a cap of Rs 300 (approximately $3.60 USD) for transactions of Rs 75,000 (approximately $900 USD) or more. Crucially, small merchants, peer-to-peer transfers, and transactions below Rs 2,000 will remain exempt from these new charges.

The move has sparked debate regarding the ultimate bearing of these costs and the rationale behind ending the zero-MDR regime. The payments industry and regulators argue that the zero-MDR model is no longer financially sustainable at UPI's scale. The Payments Council of India (PCI) previously warned that government incentives cover only a fraction of UPI's estimated annual costs, which run into billions of rupees.

Finance Minister Nirmala Sitharaman has framed the change as an investment mechanism, intended to allow banks and fintech firms to enhance infrastructure, innovation, and security, ultimately benefiting users. While many fintech companies have voiced concerns, particularly regarding consumer and small business impacts, some, such as Pine Labs, have supported the change to accelerate the growth of the UPI ecosystem.