The Indian government announced on September 15, 2026, that a Merchant Discount Rate (MDR), fee charged for processing digital payments, will apply to Unified Payments Interface (UPI) transactions for the first time in nearly six years.
The revised framework, introduced under the Payment and Settlement Systems Act, 2007, takes effect from October 15, 2026, and sets a 0.4% MDR on Person-to-Merchant (P2M) UPI transactions above ₹2,000 (roughly $20.8). The charge is capped at ₹300 for transactions of ₹75,000 or more. Person-to-Person (P2P) transfers remain free regardless of value, as do P2M transactions up to ₹2,000 and small merchants receiving up to ₹1 lakh a month through UPI QR payments. Consumers will not be charged. The fee applies to the merchant payment ecosystem and will be shared among banks, payment service providers and UPI app providers.
The introduction of this MDR has sparked substantial debate among influencers on X. Influencers see the measure as an attempt to create a durable revenue base for banks, acquirers, and payment platforms, but they also expect merchants to test ways of limiting their exposure to these charges, says GlobalData, an intelligence and productivity platform.
Shreyasee Majumder, Social Media Analyst at GlobalData, comments: “Influencers largely view MDR as a transition to a model in which participants in the UPI ecosystem can earn revenue from merchant transactions. They expect the additional income to support payment infrastructure, cybersecurity investment, and the development of services beyond basic payments, including credit-linked products. Clearer UPI monetization is also seen as improving the financial outlook for payment companies, supporting public listing plans for major players such as PhonePe, and significantly lifting forward earnings forecasts for merchant platforms like Paytm and Pine Labs.
Influencers expect larger merchants above monthly turnover thresholds to absorb the fee, while peer-to-peer transfers, recurring payments, and rural QR codes remain exempt. They anticipate that some merchants may encourage cash payments or use other means to recover the expense on higher-value transactions. However, influencers also emphasized that the new UPI levy remains substantially lower than traditional debit and credit card processing charges. In the long term, the ecosystem must ensure that improvements in infrastructure and value-added services outweigh merchant cost pressures to preserve widespread digital adoption.”
Below are a few popular influencer opinions captured by GlobalData’s Social Media Analytics Platform:
Bipin Preet Singh, CEO at MobiKwik:
“UPI is run as an ecosystem by banks and fintechs and NPCI. It is not funded or run by the Govt. When Govt funds the subsidies paid for UPI, that amount comes from tax payers pocket. Moving to market linked pricing mechanism removes this tax burden and directly links the cost to large businesses which benefit from UPI. Think logically: If there was no UPI, customers will have to keep cash and businesses have to handle and store cash. That’s not free.”
Chandra R. Srikanth, Executive Editor at Moneycontrol:
“The cost cannot be passed on from the merchant to the customer, in principle. But if the merchant gets more than 1 lakh per month from UPI, MDR will apply. It might lead to merchants asking/incentivising customers to pay in cash. That said, UPI MDR is still lesser than charges on debit card (0.90%) and credit cards (1.5-2.5%)”
Monica Jasuja, Chief Expansion and Innovation Officer at Emerging Payments Association Asia:
“….UPI is critical national infrastructure. It has to be available. Secure. Resilient. Fraud-resistant. Capable of handling extraordinary scale. And ready for the next 500–600 million Indians we still need to bring meaningfully into the digital payments economy. All of that requires continuing investment in technology, capacity, security, redundancy and innovation. So introducing sustainable economics into UPI should not automatically be characterised as capitalism trying to monetise something that was free….”
Abhishek Kothari, Research Analyst:
“Paytm and Pine Labs – sharp EBITDA/ PBT upgrades: We now explicitly incorporate UPI MDR monetisation into Paytm and Pine Labs estimates. We assume ~30% of Paytm’s UPI GMV is MDR eligible, while this is ~70% for Pine Labs. We expect Paytm’s merchant acquiring strength to enable to capture ~10bps within the MDR pie, while we build 6bp for Pine Labs….”
Deepak Shenoy, CEO at Capitalmind Mutual Fund:
“…. Expect some deals on UPI like you get discounts for paying through some credit cards. After all some revenue can be gathered if UPI generates fees. Eventually, by keeping most of UPI still free, I think the MDR currently is kinda-sorta ok (except we need way lower fees for investment related payments!)….”
