Fact-check date: September 16, 2026
Recently, various kinds of information regarding UPI have appeared on social media and in some digital posts. These claims suggest that MDR, or Merchant Discount Rate, will be applicable to UPI payments above ₹2,000 and that this could increase the burden on customers as well as people investing in the stock market. However, after checking the available official documents, the picture is somewhat different. The Ministry of Finance and the Press Information Bureau (PIB) of the Government of India issued information regarding the new UPI MDR framework on September 15, 2026. According to this information, MDR is primarily a charge within the merchant and payment ecosystem; it is not a UPI charge to be collected directly from customers.
New MDR Framework to Take Effect from October 15, 2026
According to the official FAQ issued by the Ministry of Finance, the revised MDR framework will come into effect from October 15, 2026.
Under normal Person-to-Merchant (P2M) UPI transactions, no MDR will be applicable on transactions up to ₹2,000. For normal P2M transactions above ₹2,000, an MDR of 0.4% has been prescribed, with a maximum MDR of ₹300 per transaction for transactions of ₹75,000 or more.
This does not mean that customers will have to pay an additional 0.4% while making a payment. The government has clarified that MDR should not be passed on to customers, and banks have been advised to ensure that merchants do not recover the MDR cost from customers. UPI app providers are also not permitted to impose a separate platform fee or hidden charge on UPI payments.
Understanding the Difference Between P2P and P2M
It is important to understand the difference between P2P (Person-to-Person) and P2M (Person-to-Merchant) transactions.
P2P means transferring money through UPI from one individual to another. According to the government, P2P UPI transactions will remain free regardless of the transaction amount. Therefore, the ₹2,000 threshold does not apply to P2P payments.
On the other hand, P2M refers to payments made to a shop, company, or other merchant. Under the normal P2M category, MDR will remain zero for transactions up to ₹2,000.
A separate zero-MDR protection will also continue for eligible small merchants under the P2PM category. According to the government, eligible small merchants receiving up to ₹1 lakh per month through UPI QR transactions will continue to receive the benefit of zero MDR.
Separate MDR for Stock Market and Mutual Fund Transactions
One of the most important points is that UPI payments related to mutual funds, securities, stockbrokers and dealers have not been placed under the normal 0.4% MDR category.
According to the Ministry of Finance's official FAQ, an MDR of 0.02% has been prescribed for eligible capital-market transactions, with a maximum limit of ₹300 per transaction. This category covers eligible UPI payments related to mutual funds, securities, SEBI-registered stockbrokers, dealers and related investment platforms.
For example, if an eligible capital-market payment is ₹10,000, an MDR of 0.02% would amount to ₹2. For ₹1 lakh, it would be ₹20, while for ₹10 lakh it would be ₹200. For a transaction of ₹15 lakh, the calculated amount would reach ₹300, after which the prescribed maximum limit of ₹300 would apply.
However, this amount is not provided as a charge to be directly collected from the customer under the MDR framework. The official FAQ makes it clear that MDR operates at the merchant/payment ecosystem level.
Will This Make Stock Market Investments More Expensive?
Based solely on the new MDR framework, it would not be accurate to say that investing in the stock market or mutual funds will directly become more expensive.
MDR and brokerage, investor charges or other statutory costs are separate concepts. The available official documents do not define MDR as a customer charge. The government has also clarified that UPI apps cannot charge customers an additional amount in the name of MDR.
Similarly, regarding recurring UPI AutoPay/mandate payments, the FAQ states that the prescribed MDR will not apply to such automated recurring payments.
An Important Caution Regarding Viral Claims
The available official documents confirm the 0.02% capital-market MDR and the ₹300 maximum limit.
However, an infographic circulating on social media shows an MDR distribution such as 40% for banks, 30% for merchants, 20% for UPI apps and 10% for bank partners. This particular percentage-wise distribution does not appear in the relevant PIB press release or the Ministry of Finance FAQ available for verification.
Therefore, it would not be appropriate to publish these percentages as official rules without an official source confirming them.
The government has stated that the MDR revenue will be distributed among various participants in the payment ecosystem, including banks and payment service/app providers.
Overall, the claim that all UPI payments will become chargeable from October 15, 2026, is not correct.
P2P UPI payments will remain free, normal P2M payments up to ₹2,000 will not attract MDR, and the zero-MDR arrangement for eligible small merchants will continue.
For normal P2M transactions above ₹2,000, the prescribed MDR is 0.4%, subject to a maximum of ₹300 per transaction. For eligible capital-market payments involving mutual funds, securities, stockbrokers and dealers, a separate 0.02% MDR, subject to a maximum of ₹300, has been prescribed.
The most important point is that MDR is not a UPI fee to be directly collected from customers.
Sources: Ministry of Finance/Department of Financial Services, Government of India; Press Information Bureau (PIB); and relevant official UPI/NPCI information.
This article has been prepared on the basis of official documents available as of September 16, 2026. If the rules are amended in the future, the latest government notification should be treated as the authoritative source.
[Official Ministry of Finance MDR FAQ](https://financialservices.gov.in/sites/default/files/2026-09/FAQs---Merchant-Discount-Rate--MDR--on-Select-UPI--P2M--Transactions_0.pdf)
[Official PIB Press Release](https://www.pib.gov.in/PressReleasePage.aspx?PRID=2310586&lang=1®=48)
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