Bank of India sees ₹100 crore a quarter from UPI MDR: what to do now

What happened

Bank of India expects to earn nearly ₹100 crore a quarter from the new merchant discount rate (MDR) on UPI, as first reported by ET BFSI. The fee is 0.4% on eligible merchant payments above ₹2,000.

The fee is not a proposal any more. In September NPCI announced a 0.4% MDR on person-to-merchant payments above Rs 2,000, capped at Rs 300 a payment, from 15 October 2026. Two days before that date, NPCI's UPI and Services Steering Committee deferred it. NPCI said it will start immediately after Diwali, on a date to be notified separately.

Some payments stay free. Person-to-person transfers carry no fee. Small merchants receiving up to Rs 1,00,000 a month through UPI QR pay nothing. Railways, telecom, insurance and fuel pay a flat Rs 5 per payment above Rs 2,000. RuPay debit card payments and UPI AutoPay are also outside the fee. The Rs 300 cap is reached at Rs 75,000. 18% GST applies on the fee, and merchants cannot recover it from customers.

UPI has carried no merchant fee since 1 January 2020. Brokerages now put the yearly pool at between ₹10,000–15,000 crore (UBS) and about ₹20,600 crore (Goldman Sachs), with Citi expecting about 60% to go to banks.

Reported by ET BFSI; carried as story 3 in our 24 October 2026 brief.

The numbers

What it means for builders

1. Work out your exposure before NPCI names the date

Split your UPI payments by size: up to Rs 2,000, above Rs 2,000, and Rs 75,000 or more, where the Rs 300 cap applies. Multiply the middle band by 0.4% and add 18% GST on the fee. Check whether you fall in a flat Rs 5 sector or the small-merchant exemption. NPCI gave two days' notice of the deferral, so the start date may also arrive with little warning. Have the number ready.

2. The fee comes out of your margin, so price it in

Merchants cannot recover the MDR from customers. A surcharge at checkout for large UPI payments is not an option. The fee is still well below the 2% + 18% GST many gateways charge for cards. For most merchants the right move is to keep UPI as the default and absorb the cost. Then look at RuPay debit and AutoPay, which stay outside the fee, for repeat and subscription payments.

3. Banks now earn on your large payments, so ask for a better deal

Bank of India expects nearly ₹100 crore a quarter. Indian Bank is considering absorbing its 0.28% acquiring-bank share to win merchants. That means acquiring banks and gateways will compete on this fee. If a large share of your UPI volume is above Rs 2,000, ask your gateway and acquiring bank in writing how they will pass the MDR through, whether they will waive any part of it, and how it will appear in settlement reports.

Who should act

• Merchants with baskets above Rs 2,000 — Electronics, travel, furniture, jewellery and education payments are the ones that will carry the fee.
• Payments and finance teams — Settlement reconciliation must read a new MDR line and its GST, from a start date that may be announced at short notice.
• Subscription and repeat-payment products — UPI AutoPay sits outside the fee, which makes mandates cheaper than one-off large UPI payments.

This week

• Pull the last three months of UPI payments and split value into up to Rs 2,000, above Rs 2,000, and Rs 75,000 or more.
• Work out the monthly fee at 0.4% plus 18% GST on the middle band and put the number in this quarter's forecast.
• Email your gateway and acquiring bank asking how the MDR will be charged, shown in settlement files and whether any part will be waived.
• Check that no checkout screen or terms page adds a UPI surcharge for the customer.

Read next

• BillDesk — enterprise payment gateway with bank integrations
• PayU — payment gateway with UPI and card routing
• CCAvenue — payment aggregator with wide acquiring bank coverage
• Payment gateways for Indian startups compared — fees and features side by side
• UPI AutoPay guide — mandates sit outside the new fee
• What do payment gateways charge in India? — card and UPI fees from published price lists
• The 24 October 2026 brief story

Sources

1. ET BFSI, Bank of India expects to gain nearly Rs 100 crore a quarter from UPI MDR, 24 October 2026 — the original report; our checker could not open it
2. The Kanal, Bank of India expects nearly ₹100 crore quarterly income from UPI MDR (citing ET BFSI), 25 October 2026
3. Khaleej Times (ANI), India to charge some merchants up to Rs 300 on UPI transactions over Rs 2,000, 16 September 2026
4. The Federal (PTI), MDR on UPI deferred; no new date announced, 13 October 2026
5. Motilal Oswal, UPI MDR charges from October 15: rules, rates and impact, 18 September 2026
6. StartupTalky, UPI's new fee pool: who gets paid, 5 October 2026
7. Free Press Journal, Indian Bank may waive 0.28% charge on merchant payments above ₹2,000, 2 October 2026
8. Income Tax Department, e-campaign on Circular 32/2019 (no MDR on RuPay debit, UPI, UPI QR), circular dated 30 December 2019
9. productgrowth.in, What do payment gateways charge in India?, checked 23 October 2026

Questions people ask

Is the UPI MDR in force?

Not yet. NPCI announced it from 15 October 2026, then on 13 October deferred it to immediately after Diwali, on a date it will notify separately.

Which UPI payments carry the 0.4% fee?

Person-to-merchant payments above Rs 2,000, capped at Rs 300. Person-to-person transfers, small merchants up to Rs 1,00,000 a month through UPI QR, RuPay debit card payments and UPI AutoPay are outside it; railways, telecom, insurance and fuel pay a flat Rs 5.

Can a merchant charge the customer for the UPI fee?

No. Merchants cannot recover the MDR from customers, so it comes out of the merchant's margin.