UPI services will not stop working on October 15, 2026. The confusion has emerged after traders in parts of Ghaziabad began displaying “Cash Only” notices to protest a new Merchant Discount Rate on selected UPI payments.

Under the revised framework, eligible person-to-merchant UPI transactions exceeding ₹2,000 will attract an MDR of 0.4% from October 15. The fee will apply to the merchant receiving the payment, not the customer making it.

Personal money transfers, merchant payments of up to ₹2,000 and transactions involving exempt small merchants will continue without this MDR. Therefore, claims that UPI itself will be discontinued are incorrect.

What is changing from October 15?

The new framework introduces a 0.4% MDR on eligible person-to-merchant, or P2M, UPI payments above ₹2,000.

A P2M transaction occurs when a customer uses UPI to pay a business for goods or services. Examples include making a payment at an electronics shop, jewellery store, supermarket, hotel or other commercial establishment.

The MDR is generally deducted within the payment-processing system before the balance is settled with the merchant. It is intended to support the UPI ecosystem’s infrastructure, cybersecurity, innovation and customer-service costs.

The fee will be capped at ₹300 for transactions of ₹75,000 or more. The notified framework reported by The Times of India says that P2P transfers and merchant payments of up to ₹2,000 will remain free.

How much MDR will apply?

The calculation is based on 0.4% of the eligible transaction amount, subject to the ₹300 maximum.

For example, if a customer purchases goods worth ₹2,200 and pays through UPI, the applicable MDR will be ₹8.80. The customer should still pay only ₹2,200; the MDR is a merchant-side payment-processing cost.

Will customers have to pay the charge?

The MDR is not meant to be collected directly from customers. Banks, UPI applications and payment providers are not supposed to add the charge to the amount paid by the consumer.

A shopkeeper should therefore not ask a customer to pay ₹2,208.80 for a ₹2,200 bill merely because UPI was selected.

However, businesses may argue that any new operating cost affects their overall margins. This concern is especially significant for sectors such as retail and distribution, where profit margins can be relatively small.

Merchants may respond by encouraging cash, accepting UPI only for smaller payments or reassessing prices. Any decision by an individual business to stop accepting UPI is different from a nationwide shutdown of the payment system.

Why are Ghaziabad traders displaying ‘Cash Only’ boards?

Some traders in Ghaziabad have started putting up notices stating that they will accept only cash payments after October 15. The notices are a protest against the additional payment-processing expense rather than evidence of UPI being discontinued.

Jewellers and other businesses that routinely receive payments above ₹2,000 are particularly concerned because a large portion of their UPI sales may fall within the MDR framework.

Reports from Ghaziabad indicate that participating shopkeepers want the zero-MDR arrangement to continue. They argue that absorbing the charge could reduce their earnings, while refusing UPI could inconvenience customers. Local reports on the traders’ protest describe the notices as individual business decisions made in response to the fee.

The signs should not be interpreted as a government instruction requiring shops to reject UPI.

Are small merchants exempt?

The reported framework provides protection for micro merchants receiving UPI payments of up to ₹1 lakh per month through QR codes. Eligible small merchants falling within this limit are expected to remain outside the MDR requirement.

This exemption is important for street vendors, neighbourhood shops and other small businesses that depend on low-value digital payments.

Additionally, transactions of ₹2,000 or less remain free. According to reports, these smaller payments account for more than 95% of person-to-merchant UPI transaction volume. As a result, a large number of everyday payments may continue without MDR.

Merchants should confirm their classification and monthly transaction limits with their bank or payment provider rather than assuming that every payment above ₹2,000 will automatically be charged.

Will money sent to family and friends be charged?

No. Person-to-person, or P2P, UPI transfers will remain free under the announced framework.

If a user sends ₹5,000, ₹20,000 or ₹50,000 to a family member or friend, the 0.4% merchant charge will not apply merely because the amount exceeds ₹2,000.

The key distinction is the recipient:

• Payment to a personal UPI account is generally classified as P2P.
• Payment to a registered business or merchant QR code is classified as P2M.
• MDR applies only to eligible merchant transactions covered by the rules.

Banks and payment platforms may still impose other limits for security, account type or daily transfer value, but those restrictions are separate from the new MDR.

Special rates apply to certain essential sectors

Selected sectors will receive concessional treatment. Reports indicate that payments above ₹2,000 in sectors such as fuel, railways, telecom and insurance will attract a flat MDR of ₹5 rather than the regular 0.4% charge.

Capital-market transactions are reportedly subject to a lower 0.02% rate, capped at ₹300.

These special categories are intended to prevent the regular percentage-based fee from creating a disproportionate burden on essential or high-value payments. Financial Express has outlined the reported exemptions and concessional categories.

What should UPI users know?

Customers do not need to stop using UPI or withdraw large amounts of cash because of the October 15 change. UPI applications, QR-code payments and personal transfers will continue functioning.

Before paying, customers may ask whether a particular shop accepts UPI, especially for purchases above ₹2,000. If a merchant insists on cash, the customer may choose another accepted payment method, such as a debit card, credit card or bank transfer.

Users should also remain alert to misinformation and fraud. No bank, shopkeeper or UPI application needs a customer’s UPI PIN to receive money. Customers should never share an OTP or approve an unfamiliar collect request in the name of an “MDR refund” or “UPI activation.”

The correct conclusion is simple: UPI is not shutting down on October 15. A merchant-side fee is being introduced for selected higher-value business payments, while consumers, personal transfers, small payments and eligible micro merchants remain protected under the reported framework.