One97 Communications, the parent company of Paytm, expects to generate additional revenue from its merchant business as a result of the National Payments Corporation of India (NPCI)'s new Merchant Discount Rate (MDR) structure. The new framework, effective October 15, 2026, introduces a charge of up to 0.4% on specific Unified Payments Interface (UPI) Person-to-Merchant (P2M) transactions that exceed ₹2,000.
New UPI MDR Framework Explained
The NPCI, which operates India's retail payment systems under the Reserve Bank of India's authorization, issued a circular on September 15, 2026, outlining the new MDR. This charge applies specifically to P2M transactions over ₹2,000, which were previously processed without any MDR. Paytm confirmed this development in an exchange filing, stating that it anticipates a positive impact on its revenue streams from these merchant payments.
No Charges for Customers
Crucially, Paytm has clarified that the new MDR will not affect customers using UPI for payments. According to the NPCI circular, all UPI payments will remain free of charge for users. This includes both Person-to-Person (P2P) transactions and P2M transactions under ₹2,000, which will also continue to be free for merchants.
“As per the NPCI Circular, no charge is levied on customers for UPI payments, which shall continue to remain free of charge for them,” Paytm stated in its filing.
The RBI has indicated that the introduction of MDR on high-value UPI transactions is designed to ensure the long-term sustainability and growth of the digital payments ecosystem. By appropriately distributing MDR across various participants, the central bank aims to support continued investment in technology, payment infrastructure, and merchant acceptance networks.
Paytm stated it would assess the full impact of the new framework after its implementation in mid-October 2026. The change marks a significant shift in the revenue economics for certain high-value digital merchant transactions while preserving the free payment experience for individual UPI users.