India Financials: UPI MDR reinstated: Positive for ecosystem economics, with issuer banks emerging as key beneficiaries

Research evidence excerpt

J P M O R G A N

Asia Pacific Equity Research

16 September 2026

India Financials

UPI MDR reinstated: Positive for ecosystem

economics, with issuer banks emerging as key

beneficiaries

The UPI Steering Committee held a meeting yesterday (September 15) and has

formally introduced a merchant discount rate (MDR) on select bank-accountfunded UPI person-to-merchant (P2M, Table 1) transactions, effective 15 October

2026. Acquiring banks can charge large merchants an MDR of 40 bps on P2M

transactions above Rs 2,000, subject to a maximum charge of Rs 300 per

transaction. Exemptions and caps: Small merchants receiving up to Rs100,000

per month through UPI QR codes under the Person-to-Person-Merchant (P2PM)

category are exempt from MDR. In addition, transactions in select essential sectors

- railways,

ns, insurance, fuel and agricultural inputs - carry a flat

fee of Rs 5 per transaction, capital market transactions carry a MDR of 2 bps

(capped at Rs 300 per transaction) and P2P transactions remain free. The

framework marks a shift away from the zero-MDR regime and establishes a

transaction-linked revenue model for Banks, PSPs and UPI apps with the aim of

strengthening the long-term sustainability of UPI. The revenues generated should

help with the expansion and improvement in payment infrastructure, especially in

rural and semi-urban areas along with investments in cyber security infrastructure,

AI-driven fraud detection, encryption upgrades, etc. There is also a strong focus on

customer protection with no charges for customers for UPI payments, prohibition

on UPI apps from imposing platform fees or other charges, while acquiring banks

have been advised to ensure that merchants do not pass the MDR on to customers.

M

2

P

six

v

:to

m

n

caIrU

India Financials

Anuj Singla AC

(91-22) 6157-3590

J.P. Morgan India Private Limited, J.P. Morgan

Tower, Santacruz(E), Mumbai - 400098, SEBI

Registration: INH000001873, (91-22) 6157-3000.

Harsh Wardhan Modi

(65) 6882-2450

J.P. Morgan Securities Singapore Private Limited/

J.P. Morgan Securities (Asia Pacific) Limited/ J.P.

Morgan Broking (Hong Kong) Limited

Shivansh Puri, CFA

(91-22) 6157-5077

J.P. Morgan India Private Limited, J.P. Morgan

…