A new Merchant Discount Rate (MDR) framework will be used for specific high-value UPI merchant transactions from October 15, 2026. MDR for UPI payments will remain zero for transactions up to ₹2,000 and 0.4% for transactions exceeding ₹2,000. However, other sectors like fuel, railways, telecom and insurance will be part of a flat fee structure.
How does MDR work for Fuel transactions via UPI?
Purchase of fuel using UPI at petrol pumps is subject to a different MDR rate from the percentage rate. The MDR would not be applicable for the transactions of Rs. 2,000 and below. For fuel payment amount of more than ₹2000, applicable MDR is a flat ₹5 per transaction, irrespective of the total fuel payment amount.
For instance, a fuel payment of ₹2,500 and ₹5,000 would attract the same charges as MDR at ₹5.00 per transaction. It is not charged according to transaction value as is the case with a percentage-based MDR.
| Fuel payment via UPI | Applicable MDR |
| ₹1,000 | ₹0 |
| ₹2,000 | ₹0 |
| ₹2,001 | ₹5 |
| ₹5,000 | ₹5 |
| ₹10,000 | ₹5 |
| ₹20,000 | ₹5 |
Also read: NPS Swasthya 2026: Pension Scheme that Offers Retirement Savings Along With Health Insurance – Check Eligibility, Premium, Cover and Withdrawals
Does the Customer pay the ₹5 MDR?
No. The ₹5 fee is for the merchant and is not an extra amount which the customer has to pay to make a UPI fuel payment. For instance, if a customer buys fuel worth ₹5,000, the customer pays ₹5,000 via UPI, the applicable MDR is settled within the payment and is not added to the fuel bill.
How is the Flat MDR different from the 0.4% rate?
The difference becomes significant as the transaction value increases. With the default MDR of 0.4%, a ₹5,000 transaction will cost ₹20, whereas a ₹10,000 transaction would result in ₹40. The MDR, however, is kept constant at ₹5 for any transactions which qualify as fuel transactions, whether the amount paid is ₹5,000 or ₹10,000. This becomes especially important in the context of high dollar purchases of fuel.
Conclusion
The new MDR structure introduces a new cost structure for UPI fuel payments. Fuel transactions up to ₹2000 are processed at zero MDR whereas transactions exceeding ₹2000 will be charged a flat ₹5 MDR irrespective of the amount of money transacted. The charge is within the merchant side payment chain and does not translate to an extra cost for the pump customer.