Economy Samyak IAS 16 Sep, 2026 3 min read

0.4% MDR on UPI Merchant Payments Above ₹2,000

NPCI has introduced a 0.4% Merchant Discount Rate (MDR) on eligible Person-to-Merchant (P2M) UPI payments above ₹2,000, effective 15 October 2026.

What is MDR?

Merchant Discount Rate (MDR) is the fee paid by a merchant to banks/payment service providers for processing a digital payment.
The collected MDR will be shared among banks, UPI apps and other payment-ecosystem participants to support infrastructure and services.

New MDR Framework

Eligible P2M payments above ₹2,000 → 0.4% MDR.
For transactions of ₹75,000 and above, MDR is capped at ₹300 per transaction.
P2M transactions up to ₹2,000 remain free.

Exemptions

All Person-to-Person (P2P) UPI transactions remain free irrespective of value.
Small merchants receiving up to ₹1 lakh per month through UPI QR payments are exempt from MDR.
The framework is designed so that most everyday and small-value UPI transactions remain outside the MDR regime.

Special Sectors

Payments above ₹2,000 in sectors such as railways, telecom, insurance and fuel will attract a flat ₹5 MDR instead of 0.4%.
Transactions involving mutual funds, securities and stock-market intermediaries will attract a reduced 0.02% MDR, capped at ₹300.

Why Has MDR Been Introduced?

The objective is to make the UPI ecosystem more financially self-sustaining while keeping most payments free.
MDR revenue is intended to support payment infrastructure, cybersecurity, innovation and customer service.
The framework seeks to preserve UPI’s affordability while providing incentives for its continued expansion, including in rural and semi-urban areas.

Impact

The government estimates that only a small proportion of merchant transactions will be affected because most payments are below ₹2,000 or qualify for exemptions.
A dedicated fund using 5% of total MDR collections is proposed to promote UPI adoption among small merchants.
The change marks a shift from a zero-MDR model toward selective merchant charges, while keeping consumer-to-consumer UPI transfers free.

26% Surge in Goods Exports Brings Down India’s Trade Deficit -THE HINDU

India’s merchandise exports rose 26.1% year-on-year to $43.81 billion in August 2026, while merchandise imports grew 14% to $70.67 billion.

Merchandise Export Surge

Merchandise exports increased from $34.74 billion in August 2025 to $43.81 billion in August 2026.
Export growth was strong in both value and volume terms, indicating broader external demand rather than only price or currency effects.
Of 168 principal export commodities, 68 recorded growth in both value and volume, while 39 recorded value growth without corresponding volume growth.

Import Growth

Merchandise imports rose 14%, from $61.96 billion to $70.67 billion.
Import growth remained significantly lower than export growth, helping narrow the merchandise trade imbalance.

Overall Trade Performance

India’s total exports of goods and services grew 25.4% to $82.7 billion in August 2026.
Total imports increased 18.7% to $92.1 billion.
Consequently, the overall trade deficit narrowed to $9.4 billion.

Role of the Rupee

A depreciating rupee can improve exporters’ price competitiveness, but the government noted that export growth was also visible in physical volumes.
This suggests that the increase was driven partly by genuine expansion in overseas demand rather than merely exchange-rate effects.

Services Trade

Services exports grew 24.6% to $38.9 billion.
Services imports increased faster, by about 37.4%, moderating the overall benefit from strong merchandise exports.

Significance

Faster export growth indicates improving external demand and export competitiveness.
A narrower trade deficit can reduce pressure on the current account and foreign-exchange position.
Sustained volume-based export growth would be more durable than growth driven mainly by currency depreciation or price effects.