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Outbyte PC Repair FREERepair Windows errors before they cause bigger problemsFix Now →Outbyte Driver Updater FREEScan for outdated or missing drivers - takes under a minuteDriver Scan →Consumers are not charged a direct UPI transaction fee under the framework described by the Ministry of Finance in September 2026. The merchant discount rate (MDR) is a merchant-side fee, but merchants could respond to business costs through prices or other choices. Whether the 2026 UPI MDR has actually raised consumer prices is not established by the available sources. An IIT Bombay report, as described by PTI on October 11, 2026, warns that the framework could weaken public trust and recommends changes; its primary report was not available to verify the details.
What UPI MDR means for consumers
MDR is a fee associated with accepting a digital payment, paid by the merchant under the framework described in the Ministry of Finance’s September 15, 2026 statement and PTI’s account of the NPCI circular. It is not the same as a fee directly debited from a customer’s UPI transaction.
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A merchant facing an added cost might absorb it, adjust prices, change payment choices, or make other business decisions. Those are possible responses, not evidence that consumer prices have risen because of UPI MDR. The sources available here do not measure price changes, surcharge incidence, or consumer behaviour following the 2026 framework.
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What the September 2026 framework says
The Ministry of Finance said on September 15, 2026, that person-to-person (P2P) UPI transactions remained free, as did payments to merchants up to ₹2,000 and transactions covered by small-merchant zero-MDR rules. It estimated that approximately 96% of person-to-merchant (P2M) transactions were unaffected. This is the government’s estimate, not an independent measurement.
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PTI’s October 11, 2026 report attributes further details to a September NPCI circular. These specifics are secondary reporting and should be checked against the original circular before being treated as operative rules:
- A reported MDR of 0.4% on specified P2M UPI payments above ₹2,000, capped at ₹300 for transactions of ₹75,000 or more.
- A reported flat ₹5 fee above ₹2,000 for specified essential services.
- A reported 0.02% rate for capital-markets transactions, also capped at ₹300.
PTI reports that merchants, rather than consumers, pay these fees. Rates, categories, exemptions, and implementation can change; the figures above describe what PTI attributed to the circular, not a direct consumer charge.
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An earlier Ministry of Finance release dated August 8, 2026 said consumers would not face UPI transaction charges, P2P would remain free, and any MDR would be limited and threshold-based. That release discussed a proposed amendment and a future committee decision, so the later September statement is the more relevant description of the framework at that time.
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PTI reports that IIT Bombay’s report, “UPI at a Crossroads: Reintroducing the MDR,” argues that UPI’s convenience and productivity benefits outweigh the incremental revenue from merchant transaction fees. It reportedly cautions that the proposed framework could harm public trust and recommends rationalising fees. The primary report was not available to verify its methodology, authors, exact wording, or full set of findings, so these points should be understood as PTI’s account.
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Limit remuneration by merchant turnover
One reported proposal is to concentrate remuneration on merchants with annual turnover above ₹50 crore. PTI says the report estimates this would account for about 90% of NPCI’s proposed MDR. That estimate is attributed to the report through PTI; it is not independently verified here.
Consider online P2M fees and exemptions
The report also reportedly discusses a reasonable charge across online P2M transactions, particularly for e-commerce merchants, and recommends exempting debt collection and loan EMI repayments from MDR. PTI quotes the report as arguing that a charge on e-commerce merchants—where cash is not a practical payment option in the same way as at a physical shop—would align more closely with a digital-payment facilitation fee. The quotation is attributed to the report, not to a named researcher.
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Does a surcharge ban prevent cost pass-through?
The available sources do not establish the full current legal scope of a UPI-specific surcharge prohibition. They also do not show that merchants are imposing UPI surcharges under the 2026 rules. A merchant-paid MDR and a separate charge demanded from a customer at checkout are distinct issues; the first does not, by itself, show that the second is occurring or permitted.
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1Fix the driver behind crashes, sound loss and screen glitches2Clear out junk files and repair common Windows errors3Scan for outdated or missing drivers - takes under a minuteRBI’s September 2016 circular warned in the context of debit-card MDR that bundling merchant charges could discourage card acceptance and give merchants scope to pass costs to customers as a surcharge. That is evidence of a concern about card MDR, not proof of UPI pass-through or a current legal opinion about UPI surcharge rules.
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Why the fee debate is a policy trade-off
The question is how to fund payment-system costs without undermining affordability, access, and adoption. RBI’s payment-systems report records that, from January 1, 2020, the Government directed that MDR not be collected on UPI and RuPay debit-card transactions. RBI describes the broader tension: high payment costs may discourage consumers and merchants from moving to digital payments, while costs set too low may fail to remunerate investment in the payment ecosystem.
The reported IIT Bombay proposals raise choices that should be assessed by who bears the cost, which merchants and transactions are included, how small merchants and essential payments are treated, and how consumer protections are made clear. The available sources do not provide a quantified comparison of those design options or establish which would best balance ecosystem funding with adoption.
What is known—and what remains unproven
- The Ministry of Finance’s September 15, 2026 statement said P2P remained free and estimated that approximately 96% of P2M transactions were unaffected.
- PTI reported specific rates and categories attributed to a September NPCI circular, but the original circular was not available here for verification.
- PTI’s account of the IIT Bombay report describes recommendations and a warning about public trust, but the primary report’s methods and precise wording could not be checked.
- No cited source measures whether merchants have raised prices, imposed UPI surcharges, or otherwise passed MDR costs to customers under the 2026 framework.
For policy history, RBI’s payment-systems report and an IIT Bombay technical report published in 2022 recount the earlier MDR change; neither establishes the effects of the 2026 framework.
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