UPI MDR from 15 October: What Shops and Billing Systems Must Change

As of 3 October 2026. NPCI announced the MDR framework and published FAQs on 15 September 2026, and the charge applies to eligible UPI payments from 15 October 2026.

Key fact	Detail
Start date	15 October 2026
What changes	0.4% MDR on person-to-merchant (P2M) UPI payments above Rs 2,000
Cap	Rs 300 per transaction for payments of Rs 75,000 and above
Who pays	The merchant, through its acquiring bank. Customers are not charged.
Still free	P2M payments up to Rs 2,000, all P2P transfers, and qualifying small merchants with UPI QR collections up to Rs 1 lakh a month
Official source	National Payments Corporation of India (npci.org.in)

This guide is for shop owners, distributors, clinics, showrooms and finance managers in India who take UPI payments at a counter, on a website or through a payment link. After reading it you will know which of your payments attract the new fee, what it costs you per month, and the five changes your POS or billing software needs before your first statement under the new rules arrives.

What is the UPI MDR charge from 15 October 2026

The UPI MDR is a fee of 0.4% that a merchant's acquiring bank deducts on person-to-merchant UPI payments above Rs 2,000, starting 15 October 2026. It is a merchant cost, not a customer charge, and it is capped at Rs 300 for large payments.

Until now, UPI payments to merchants have run at zero MDR for most businesses. The new framework, announced by NPCI with FAQs dated 15 September 2026, keeps the low-value end free and introduces a fee only where the ticket size is higher. NPCI's own projection, as reported, is that more than 95% of merchant UPI transactions will stay outside the charge because most of them are below Rs 2,000.

A few sectors get a different structure. Reports of the FAQs say railways, telecom, insurance and fuel attract a flat Rs 5 per transaction above Rs 2,000, and capital market payments carry a separate 0.02% rate. If you sell in those sectors, confirm the treatment with your acquiring bank before you change prices or reports.

Is UPI still free for customers

Yes. Customers pay nothing extra for UPI, whether they pay a shop, a website or a friend. The MDR is settled between the merchant and its bank, and banks have been told to ensure merchants do not pass the cost to customers at checkout.

This matters for your counter staff. A customer who has read a scary forward on WhatsApp may ask whether paying Rs 4,500 by UPI will cost them extra. The answer is no, and your bill should show the same amount whether the customer pays by cash or UPI. Adding a "UPI surcharge" line to the bill is exactly what the framework tells banks to prevent, so do not configure one in your billing software.

How much will UPI MDR cost a shop each month

For most shops the monthly cost is small but not zero: 0.4% of only the UPI receipts above Rs 2,000. A store doing Rs 6 lakh a month of such payments pays about Rs 2,400 a month, before GST on the bank's fee.

The useful way to estimate it is to split your UPI receipts by ticket size. Pull last month's UPI report from your POS or bank statement and sum only the payments above Rs 2,000. The table below shows worked examples per transaction.

UPI payment (P2M)	MDR at 0.4%	Amount the merchant bears
Rs 1,800	Not applicable	Rs 0
Rs 2,000	Not applicable	Rs 0
Rs 3,000	Rs 12	Rs 12
Rs 15,000	Rs 60	Rs 60
Rs 50,000	Rs 200	Rs 200
Rs 1,00,000	Rs 400	Rs 300 (capped)

Banks normally charge GST on fees they collect, so expect GST on the MDR amount in your bank's invoice. Ask your acquiring bank how it will show the fee and the tax on it, because that decides how your accountant books it and whether you can claim input tax credit on it.

Which businesses feel it most

The fee bites hardest where UPI tickets are large and margins are thin. In Gujarat that means electronics and mobile showrooms, furniture shops, jewellery and imitation jewellery wholesalers in Rajkot, building material dealers, tile and sanitaryware traders around Morbi, and B2B distributors who collect Rs 20,000 to Rs 2 lakh per invoice by UPI. A kirana store or a tea stall with Rs 150 tickets will barely notice it.

Which merchants are exempt from UPI MDR

Small merchants under NPCI's P2PM category stay at zero MDR when their UPI QR collections are up to Rs 1 lakh a month. Any merchant's payments up to Rs 2,000 are also free, and P2P transfers never attract MDR.

According to the reported FAQs, a P2PM merchant whose monthly UPI collections cross Rs 1 lakh for three consecutive months moves to the regular P2M category. If you are near that line, track your monthly UPI inflow so the change does not surprise you. Your bank decides your category, so ask it in writing which category your VPA or QR is mapped to.

• Free: P2M payments of Rs 2,000 or less, all P2P transfers, qualifying P2PM merchants under Rs 1 lakh a month.
• 0.4% capped at Rs 300: regular P2M payments above Rs 2,000.
• Different structure: notified sectors such as railways, telecom, insurance, fuel and capital markets.

What your POS and billing software must change before 15 October

Your billing software needs to record the MDR on each UPI receipt, reconcile the net amount the bank settles, and report the fee as an expense. Without these changes your cash book and bank balance will drift apart by a few thousand rupees every month.

Here are the changes we recommend, in priority order.

1. Capture UPI as a separate tender with the transaction reference. Every UPI receipt should store the UTR or RRN, the VPA or terminal ID and the gross amount. Many small systems record UPI as "card/online" in one bucket, which makes reconciliation impossible.
2. Calculate expected MDR per receipt. Apply the rule in software: zero up to Rs 2,000, 0.4% above it, capped at Rs 300, with an override for exempt categories. Store the expected fee next to the receipt.
3. Import the settlement file and match it. Match each settlement line to its receipt by reference number, compare expected and actual fee, and flag mismatches. This is the same matching logic we build for card settlements.
4. Post the fee to an expense ledger. Book MDR and the GST on it to a "bank charges" or "payment processing fees" ledger so your profit and loss shows the true cost of UPI.
5. Add a monthly MDR report. Show count and value of UPI payments above and below Rs 2,000, total fee, and fee as a percentage of sales. Owners need this number to decide pricing and payment mix.

Do not add any customer-facing surcharge logic. The bill amount must stay the same across payment modes.

How to reconcile UPI settlements with the new fee

Reconciliation means matching every UPI receipt in your billing system to the net amount your bank credits, with the MDR as the difference. Do it daily by reference number, not monthly by totals, or small errors will hide inside large numbers.

The practical flow looks like this. Your POS records a Rs 12,000 UPI sale with its reference number. The next working day, your bank settles Rs 11,952 for that reference plus a separate GST line on the Rs 48 fee, or settles the gross and debits fees in a batch at month end. Your software must handle both styles because banks differ. Ask your bank which style it will use for your account.

Multi-outlet businesses should reconcile per outlet and per terminal. A three-outlet retailer in Rajkot that we work with pools UPI from two QR codes into one current account, so the matching key has to be the terminal ID plus reference, not just the amount. Our guide on multi-outlet inventory in Gujarat covers the same data structure for stock.

What JK Tech Hub has seen on real billing projects in Gujarat

On POS and billing projects across Rajkot and Saurashtra, the biggest UPI problem is not the fee itself but that most shops cannot see their UPI receipts by ticket size. The data exists in the bank statement but not in the billing system.

A few patterns we keep seeing, anonymised:

• An electronics showroom on 150 Feet Ring Road recorded UPI and card in one "online" tender. Splitting them took one sprint, and the owner could then see that roughly a third of his UPI value came from tickets above Rs 20,000.
• A building material dealer near Gondal Road collects most B2B dues by UPI. For him, a 0.4% fee on Rs 50,000 receipts made RTGS or NEFT for large dealer payments worth discussing, since those transfers are priced differently by his bank.
• A two-outlet pharmacy in Rajkot sits mostly under Rs 2,000 per bill, so its expected monthly MDR is tiny. The work there was a report, not a pricing change.

The lesson: measure first. Most businesses can estimate their October bill in an afternoon if the billing system tags UPI correctly.

How to decide your response as a business owner

Decide your response by measuring your UPI value above Rs 2,000, comparing the 0.4% fee to your margin on those sales, and then choosing between absorbing it, steering large B2B payments to bank transfer, or adjusting list prices for everyone.

Your situation	Sensible response
Most bills under Rs 2,000 (grocery, pharmacy, food)	Absorb. Add the monthly MDR report and move on.
Retail with large tickets and decent margins	Absorb and track the fee as a cost line in pricing reviews.
B2B distributor with thin margins and large UPI receipts	Offer NEFT or RTGS details on invoices for dealer payments, keep UPI for walk-in and small orders.
Online store or payment-link sales	Check how your payment gateway prices UPI after 15 October and update checkout fee reports.
Small vendor under Rs 1 lakh a month on QR	Confirm your P2PM category with your bank and monitor monthly inflow.

Whatever you choose, keep the customer price the same across payment modes. If you raise prices, raise them for everyone, not only for UPI payers.

Related reading and next step

If you want a billing system that tags UPI by ticket size, reconciles settlements by reference number and reports MDR as a cost line, look at our POS billing software and payment gateway integration work. For budgets, read POS billing software cost in India and GST billing software requirements. To get a fixed quote for adding MDR tracking to your current system, reach us through the contact page or on WhatsApp at +91 7265004040.