For years, paying through UPI has felt almost like using cash: scan a QR code, enter the amount and pay without thinking about any extra charge.
Person-to-Person payments will remain free, regardless of the amount. But Why? But this is going to change from October 15: a 0.4 per cent Merchant Discount Rate (MDR) will apply to specified Person-to-Merchant (P2M) transactions above Rs 2,000. Payments up to Rs 2,000 will continue to have zero MDR. For transactions of Rs 75,000 and above, the MDR will be capped at Rs 300.
UPI Transactions The scale of the shift can be seen in how people use UPI today. Why introduce it now? UPI has grown far beyond its original role as a convenient way to transfer money. It now handles a huge number of payments between customers and businesses every day. Running this network requires payment infrastructure, security systems, fraud prevention and constant upgrades. The new MDR is meant to provide a revenue stream to the payment ecosystem and make the system more financially sustainable. But not all merchant payments are large. So there is a clear difference between the number of payments and the amount of money involved: high-value payments are relatively few, but they move a much larger share of the money. P2M itself has become a much bigger part of UPI.
In FY26, UPI recorded 24,162 crore transactions, and about 63 per cent were Person-to-Merchant (P2M) payments. Around 15,200 crore transactions involved customers paying businesses, rather than transferring money to another person. Around 4 per cent of P2M transactions are above Rs 2,000. At the same time, these higher-value transactions account for roughly 66 per cent of the total value of P2M payments. It rose from 446 crore transactions in FY20 to around 15,200 crore in FY26. Its share of total UPI volume increased from roughly 36 per cent to 63 per cent during this period.
