For most Indians, paying through UPI has felt like paying with nothing at all. Scan, enter the PIN, done. For a slice of transactions, that is about to change. From October 15, merchants receiving UPI payments above Rs 2,000 will pay a merchant discount rate, or MDR, of 0.4 per cent. A Rs 3,000 bill will cost the shopkeeper Rs 12. A Rs 50,000 purchase will cost Rs 200. At Rs 75,000 and above, the charge stops rising at Rs 300. The ground was prepared on September 14, when the Finance Ministry issued a notification under Section 10A of the Payment and Settlement Systems Act, 2007.

It named RuPay debit cards and UPI payments up to Rs 2,000 as modes on which no bank or system provider may impose a charge, directly or indirectly, on the person paying or the person being paid. A day later, the UPI and Services Steering Committee, led by the National Payments Corporation of India, spelt out what happens above that line. The fine print is narrower than the headlines. Transfers between individuals stay free, whatever the amount. Small vendors classified as P2PM, those receiving up to Rs 1 lakh a month through UPI, are exempt. Recurring AutoPay mandates carry no prescribed MDR.

Some categories, including railways, telecom, insurance, fuel and utilities, will pay a flat Rs 5 on payments above Rs 2,000, while capital-market transactions will attract 0.02 per cent, also capped at Rs 300. The ministry says 96 per cent of merchant transactions will remain free. The reasoning deserves a fair hearing. In July 2026 alone, UPI processed about 2,366 crore transactions worth roughly Rs 29.9 lakh crore, according to government figures. A system of that size is no longer a convenience. It is critical national infrastructure, and it needs servers, fraud detection, authentication, cybersecurity and constant upgrades.

Since January 2020, when MDR on UPI was scrapped to encourage digital payments, banks and payment apps have earned little from the basic merchant transaction, and government subsidies have filled part of the........

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