Indian government exempts UPI credit card payments from 0.4% MDR
Good news if you use credit cards with UPI: these payments will not be hit by the new 0.4% merchant discount rate (MDR) that kicks in on October 15, 2026.
The fee only applies to certain direct account-to-merchant-account UPI transactions over ₹2,000, so most day-to-day purchases are unaffected.
The government says this change will impact just about 4% of all merchant transactions.
Above ₹2,000 UPI spends 0.4% MDR
For bigger spends above ₹2,000, there is now a 0.4% MDR or a flat ₹5 fee for sectors like railways and telecom.
If you are into stocks or investments, capital-market transactions get an even lower MDR of 0.02%, capped at ₹300 per transaction.
Meanwhile, small merchants operating under the person-to-person merchant (P2PM) model still enjoy zero fees, and the government is setting aside part of the MDR collected to help more small shops adopt UPI.