The real truth about charges on UPI! Why PhonePe and Paytm will be 80% cheaper than card payments? Understand the complete calculation of NPCI

From October 15, 2026, some UPI transactions above Rs 2,000 will be charged 0.4 percent. Which is named Merchant Discount Rate i.e. MDR. This new charge will not apply to every UPI payment and will not be charged to customers making UPI payments. This entire charge will be taken from the shopkeeper i.e. the merchant. After the announcement of this new charge, UPI users are wondering whether they should switch from UPI to debit card or credit card for daily transactions. National Payments Corporation of India (NPCI) said in a tweet that even after UPI transaction charges, it is much cheaper than debit or credit card charges. Let us also tell you the full calculation

How cheaper is UPI than debit and credit cards?

NPCI tweeted What is the accounting of UPI MDR? Rs. MDR is nil on transactions up to 2,000 – this includes about 96 percent of UPI transactions. Rs. The UPI MDR is 0.4 percent on transactions above 2,000, with a maximum limit of Rs. 300 is In a social media post

Which UPI transactions will have zero MDR charges?

No MDR will be charged on most daily UPI payments. Zero MDR will be applicable on P2M transactions up to Rs 2,000, which is estimated to account for around 96% of total UPI transactions.

What does UPI look like in MDR numbers?

For transactions up to ₹2,000, there is zero MDR — which covers about 96% of UPI transactions. For transactions above ₹2,000, the UPI MDR is 0.4%, capped at ₹300. #UPI #UPIChalega #DigitalPayments pic.twitter.com/Xo7IQ7rb1m

— UPI (@UPI_NPCI) September 17, 2026

Small traders will continue to get zero MDR

This new charge will not automatically apply to roadside vendors and other small businesses. Every month through UPI QR Code under Person-to-Person-Merchant (P2PM) category Rs. All transactions of merchants receiving up to 1 lakh will be free of charge. This means that neighborhood shops, roadside vendors and other eligible small businesses can continue to accept UPI payments without the new MDR, even if the transaction value is Rs. More than 2,000.

What happens to UPI payments above Rs 2,000?

There will be a separate MDR for essential services

In some essential and low margin sectors, transactions above Rs 2,000 will be charged a flat MDR of Rs 5 per transaction. It includes sectors like railways, telecom, insurance, fuel and agricultural commodities. Instead of calculating 0.4 per cent for these transactions, a flat charge of Rs 5 has been kept to give businesses in these sectors more certainty about their payment costs.

Very low rates for capital-market payouts

A separate charge has been fixed for capital market related payments. Transactions involving mutual funds, securities, stock brokers and dealers will be charged 0.02 percent, subject to a maximum of Rs. Can be up to 300. For example, the MDR on a capital-market payment of Rs 10,000 at 0.02% would be only Rs 2.

Will UPI cost consumers?

No. The shopper has to pay this charge of UPI. Which is a payment processing charge and is not payable by customers making UPI payments. Banks have been advised that merchants should not pass the burden of this charge on to customers. UPI application providers are also not allowed to charge platform fees or hidden charges from consumers in the name of MDR. People will be able to continue using UPI without any monthly transaction quota or free usage limit.