UPI Merchant Fee From October 15: How It Stacks Up Against Card, Credit-Linked UPI Charges

UPI payments for shopping and bill payments at merchant outlets have been free of any fee for both the shopper and the merchant's bank ever since the Reserve Bank of India and the government pushed for zero-cost digital payments in 2020. According to reporting by Livemint, that is set to change from October 15, with a Merchant Discount Rate (MDR) reportedly coming into effect on at least some UPI transactions, and card networks and banks now comparing how the new UPI charge would sit against the fees merchants already pay on debit cards, credit cards, and UPI payments made through a linked credit card (often called credit-linked UPI or RuPay Credit Card on UPI).

For a shopper, the immediate, practical point is this: MDR is a fee the merchant's bank deducts from the amount the merchant receives — it is not deducted from a customer's account and does not change what a buyer pays at the till. But it does change merchant behaviour. Where MDR exists today, on cards, many small and mid-sized merchants either add a surcharge, nudge customers toward cash or UPI instead, or set a minimum bill value for card payments. If a comparable charge starts applying to some UPI transactions from October 15, similar merchant-side reactions become possible for the affected transaction types — even though plain UPI person-to-merchant (P2M) payments funded from a bank account have historically stayed protected from MDR under RBI's zero-charge framework.

This article lays out how MDR works, what is reportedly changing from October 15 as per Livemint's report, how the likely UPI charge compares with existing debit card, credit card, and credit-linked UPI charges, and what both merchants and consumers should actually do about it.

Key takeaways

• Livemint has reported that an MDR is due to kick in on UPI transactions from October 15, with comparisons now being drawn against existing debit card, credit card, and credit-linked UPI charges.
• MDR is charged to the merchant, not the customer — it is a small percentage the merchant's bank and payment network deduct from the settlement amount.
• Plain bank-account-to-merchant UPI payments have been zero-MDR since 2020 under RBI-backed rules designed to keep everyday digital payments free; any new charge is reported to apply in specific situations, not to every UPI transaction a shopper makes.
• Debit cards already carry a modest MDR band; credit cards carry a market-set MDR that is meaningfully higher; credit-linked UPI has sat somewhere in between because it effectively behaves like a credit card transaction routed over UPI rails.
• Small merchants and neighbourhood stores are typically the most sensitive to any new charge, since their margins are thinner and they have limited room to absorb fees.
• Until the exact contours of the October 15 change are officially notified, both merchants and shoppers should treat headline percentages with caution and watch for confirmation from their bank or payment app.

What MDR is and why UPI has stayed fee-free

MDR, or Merchant Discount Rate, is the fee a merchant pays out of every digital payment they accept. It is split between the merchant's bank (the acquirer), the customer's bank (the issuer), and the payment network or app that routes the transaction. On a card payment, this typically ranges from well under 1% to over 2%, depending on the card type and merchant category.

UPI, however, was built differently. When the National Payments Corporation of India scaled up UPI as India's default digital rail, the RBI and the finance ministry made a policy call: person-to-merchant UPI payments funded directly from a bank account would carry zero MDR. The idea was to remove any friction that could push small merchants back toward cash, with the government reimbursing some of banks' costs through incentive schemes rather than letting banks charge merchants directly.

This is why, unlike in many other countries, a shopper paying via UPI QR code at a kirana store, a pharmacy, or a large retail chain has not seen the merchant absorb a card-like fee — at least not until now, per the development Livemint has reported.

What is reportedly changing from October 15

Based on the headline reported by Livemint, an MDR structure is expected to apply to UPI transactions starting October 15, and the comparison being drawn is specifically against credit card fees, debit card fees, and credit-linked UPI fees — payments made via a credit card that is linked to a UPI handle rather than a bank account.

This framing matters because it suggests the change is not being pitched as a blanket fee on every UPI payment. Credit-linked UPI already sits closer to how a credit card transaction is priced, since the money is effectively a short-term credit draw rather than a same-day debit from a bank account. It would not be surprising, going by how card-network economics typically work, for any new MDR to be targeted at this credit-linked segment, at larger merchants, or at transactions above a certain value, rather than at the ordinary UPI payment a household makes from its savings account.

Until an official RBI or NPCI circular is published and banks pass on the details, the exact rate, the transaction types covered, and the merchant categories affected remain a matter of reported detail rather than confirmed policy. Readers should treat any specific percentage figure circulating online with caution unless it is traceable to an official notification.

How merchant charges compare across payment modes

The table below sets out the broad, standing pattern of how MDR has typically worked across payment modes in India — useful as a reference point for judging how a new UPI charge might compare once details are confirmed.

Payment mode	Who typically sets the fee	Broad MDR pattern (merchant-borne)	Passed on to shopper?
Debit card (RuPay/other)	RBI-influenced caps, tiered by merchant turnover	Modest, generally under 1% of transaction value	Rarely, except at some fuel pumps/utilities
Credit card	Market-determined by card network and issuer	Higher, commonly in a 1.5%–3% range depending on card and category	Sometimes, via a visible surcharge
UPI (bank account funded)	RBI/NPCI zero-MDR mandate since 2020	Nil for the merchant	No
Credit-linked UPI (credit card via UPI)	Card network/NPCI interchange rules	Reported to track closer to credit card pricing than to plain UPI	Uncertain — depends on the final structure

These figures describe the general shape of India's MDR landscape based on standing rules, not the specific rate reportedly taking effect on October 15, which has not been officially detailed at the time of writing.

A worked example: what a fee could mean for a small merchant

To understand why merchants react to even small MDR changes, consider a neighbourhood electronics store doing ₹3,00,000 in monthly digital sales, all currently via UPI QR code at zero MDR.

• At zero MDR (today's plain UPI position): the merchant keeps the full ₹3,00,000.
• At a hypothetical 0.3% MDR, similar to the lower end of the debit card band: the merchant would absorb roughly ₹900 a month, or about ₹10,800 a year.
• At a hypothetical 1.5% MDR, similar to a mid-range credit card rate — the level some credit-linked UPI transactions could approach: the merchant would absorb roughly ₹4,500 a month, or ₹54,000 a year.

For a store running on single-digit percentage margins, even the lower scenario is a meaningful dent, which is why merchant bodies typically push back hard whenever an MDR change is proposed on UPI, and why the scope of any October 15 change — which transactions it covers — matters far more than the headline percentage itself.

Shoppers can run similar arithmetic using an EMI calculator when comparing whether to pay for a purchase via a credit card, a credit-linked UPI transaction, or a straightforward bank-funded UPI payment, since the underlying cost structure differs even when the price on the shelf looks identical.

Who is likely affected, and who is not

• Small kirana stores, street vendors, and merchants accepting only bank-account-funded UPI QR payments are the least likely to see a direct change, given the standing zero-MDR mandate for plain UPI.
• Merchants who accept credit-linked UPI payments, or who already accept credit cards, are more likely to see any comparison or change apply to those specific payment types.
• Large retail chains and e-commerce platforms, which negotiate MDR rates directly with acquiring banks, are typically better positioned to absorb or negotiate around any new charge than small, single-outlet merchants.
• Shoppers using a plain bank-account UPI app such as their linked savings account are the least likely to notice any change at checkout, since MDR is a merchant-side cost.
• Shoppers using a credit card linked to UPI, or a straightforward credit card, are in the segment most relevant to the comparison Livemint's report draws, since that is where merchant costs have historically been highest.

What merchants and shoppers should do now

For merchants:

1. Wait for your acquiring bank or payment aggregator to confirm in writing which transaction types, if any, will attract a new charge from October 15.
2. Avoid changing customer-facing pricing or adding ad hoc surcharges until the official rate and scope are confirmed — premature surcharging can create disputes, and payment networks have historically discouraged unauthorised surcharging on customers for standard payment modes.
3. Segment your own sales data by payment type now, so you can quickly estimate the cost impact once the exact structure is known.

For shoppers:

1. Continue using ordinary UPI from your bank account for everyday purchases; this has not been reported as a segment likely to see a new consumer-facing cost.
2. If you routinely use a credit card linked to UPI for larger purchases, keep an eye on your bank's app or SMS alerts around October 15 for any change in how those transactions are processed or priced.
3. Compare the effective cost of paying by credit card, credit-linked UPI, or a personal loan for a large one-off purchase using an EMI calculator before assuming one route is automatically cheaper.

Common mistakes to avoid, and the likely outlook

The most common mistake right now would be to assume every UPI transaction is about to become chargeable — that is not what the reported comparison suggests, and plain bank-funded UPI has a multi-year policy track record of staying fee-free for ordinary consumers. A second mistake would be for a merchant to pre-emptively add a blanket UPI surcharge before any official notification; doing so risks both customer pushback and potential conflict with payment network rules on surcharging.

The more durable pattern in India's payments market has been gradual, targeted adjustments — RuPay credit card interchange on UPI is a recent example — rather than sweeping fee introductions across the entire UPI ecosystem, given how central zero-cost UPI has been to the government's digital payments push. Readers should expect the October 15 change, once officially confirmed, to be narrower in scope than a headline comparison to credit card fees might imply.

Looking beyond this one change, it's worth periodically checking interest rate movements and gold loan or personal loan terms alongside payment-cost shifts like this one, since all three affect the real cost of borrowing and spending for the same household.

Frequently asked questions

Will I, as a customer, be charged for paying via UPI from October 15?

Based on what has been reported, the change centres on MDR, which is a merchant-side cost deducted by banks and payment networks, not a fee charged directly to the customer's account. Ordinary bank-account UPI payments have stayed free for shoppers under the standing zero-MDR framework, and there is no indication that is changing for everyday consumer use.

What is the difference between UPI and credit-linked UPI?

Standard UPI moves money directly from your bank account to the merchant, similar to a debit transaction. Credit-linked UPI lets you make a UPI payment using a linked credit card instead of your bank balance, so the transaction behaves economically like a credit card purchase even though it is initiated through a UPI app or QR code.

Why did UPI not have MDR until now?

The RBI and the government made UPI person-to-merchant payments zero-MDR starting 2020 to encourage small merchants to adopt digital payments without added cost, offsetting some of the resulting cost to banks through separate incentive schemes rather than merchant charges.

How does credit card MDR compare with debit card MDR?

Debit card MDR has historically sat in a lower band, generally under 1% of the transaction value, while credit card MDR is market-determined by card networks and issuers and commonly runs higher, reflecting the cost of extending short-term credit and rewards programmes attached to the card.

Where can I check the official rules once they are notified?

Once an official circular is issued, it would typically appear through the Reserve Bank of India's notifications and master directions, and would be communicated to merchants through their acquiring bank or payment aggregator rather than through news coverage alone.