UPI Framework Sets ₹5 MDR for Agriculture Input Transactions Above ₹2,000
19 September 2026, New Delhi: New UPI payment framework keeps 96% of merchant transactions outside MDR; agricultural inputs included among essential sectors.
India’s new Unified Payments Interface (UPI) framework has introduced a flat Merchant Discount Rate (MDR) of ₹5 per transaction for payments above ₹2,000 in agricultural inputs, placing the sector alongside other essential and thin-margin sectors such as fuel, railways, telecommunications and insurance.
The framework, announced by the Ministry of Finance on September 15, 2026, is intended to establish a revenue mechanism for the UPI payment ecosystem while keeping person-to-person payments and the majority of merchant transactions free. According to the government, approximately 96% of all person-to-merchant (P2M) transactions will remain unaffected.
₹5 MDR for Agricultural Input Payments
Under the new framework, P2M transactions above ₹2,000 normally attract an MDR of 0.4%, with a maximum MDR of ₹300 for transactions of ₹75,000 and above.
However, a separate flat rate applies to essential and thin-margin sectors. Payments above ₹2,000 for agricultural inputs will attract an MDR of ₹5 per transaction, irrespective of the transaction value.
The agricultural-input category is particularly relevant to India’s farm economy, where digital payments are increasingly used across transactions involving farm inputs and services. The flat-rate structure provides a defined cost for eligible transactions rather than applying the standard percentage-based MDR.
Small Merchants to Remain Under Zero-MDR Framework
The framework also provides continued protection for small merchants. Merchants receiving up to ₹1 lakh per month through UPI QR codes under the Person-to-Person-Merchant (P2PM) category will continue to receive zero MDR on their transactions.
This provision covers small businesses such as street vendors and neighbourhood shops and is aimed at supporting continued adoption of digital payments among micro and small businesses.
UPI Payments to Individuals Remain Free
There will be no MDR on person-to-person (P2P) UPI transactions, regardless of the amount transferred. Payments to merchants up to ₹2,000 will also remain free of MDR.
The government said that MDR will apply to only around 4% of merchant transactions, leaving approximately 96% outside the MDR framework.
Customers will not be required to pay MDR. The Ministry has advised banks to ensure that merchants do not pass the charge on to customers, while UPI application providers have been prohibited from imposing platform fees or hidden charges.
Revenue to Support UPI Infrastructure
The Ministry of Finance said MDR is neither a tax nor a government or NPCI charge. The revenue is distributed among participants in the payment ecosystem, including banks, payment service providers and UPI application providers.
The framework also provides for a dedicated fund, with an amount equivalent to 5% of total MDR collections, to promote UPI adoption among small merchants. The government said revenue from larger merchant transactions will also support expansion and improvement of payment infrastructure, including in rural and semi-urban areas.
For India’s agriculture sector, the inclusion of agricultural inputs within the essential-sector category means that eligible UPI payments above ₹2,000 will be subject to the specified ₹5 flat MDR, while smaller transactions and qualifying small merchants remain under the zero-MDR provisions.
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