New 0.4% Merchant Discount Rate on Crypto UPI Deposits: What Indian Users Need to Know

Key Changes Effective October 15, 2026

Understanding the Impact of the MDR on Crypto Exchanges

P2P Transfers Remain Exempt from Charges

The Hidden Costs of Crypto Transactions in India

Governance and Regulatory Framework for UPI Transactions

What Should Users Check Post-Implementation?

The Future of Fees: Will Exchanges Absorb the Costs?

Indian Crypto Exchanges Brace for New UPI Fee Structure

New Delhi – Starting October 15, 2026, Indian cryptocurrency exchanges that accept rupee deposits via the Unified Payments Interface (UPI) will be subject to a Merchant Discount Rate (MDR) of 0.4% on transactions exceeding ₹2,000. This regulatory change marks a significant shift in the cost structure for exchanges, which have relied on zero-fee deposits as a key strategy for customer acquisition.

The National Payments Corporation of India (NPCI) and the finance ministry have yet to issue a specific circular addressing cryptocurrencies, but the new fee will apply to all Person-to-Merchant (P2M) UPI transactions above the ₹2,000 threshold. Notably, exchanges like CoinDCX, CoinSwitch, Mudrex, and ZebPay are expected to absorb this cost, ensuring that users continue to see the full amount credited to their accounts, as the finance ministry has prohibited passing the charge onto consumers.

Impact on Exchanges and Users

While the MDR will only affect about 5% of transaction volume, it could cost exchanges up to ₹40 lakh monthly. This change comes at a time when the Central Bureau of Investigation (CBI) has issued warnings about the risks associated with informal peer-to-peer (P2P) trades, reinforcing the importance of using regulated platforms for crypto transactions.

The new fee structure effectively ends the zero-fee model that has been a hallmark of the Indian crypto landscape since the waiver of MDR on UPI transactions in January 2020. As a result, exchanges will need to navigate a delicate balance between maintaining competitive pricing and absorbing new costs.

How the Fee Works

The 0.4% MDR applies specifically to P2M transactions over ₹2,000, with a cap of ₹300 for transactions of ₹75,000 and above. For example, a ₹10,000 deposit will incur a fee of ₹40, while a ₹50,000 transaction will attract a charge of ₹200. Transactions below ₹2,000 remain exempt from this fee, which accounts for over 95% of P2M UPI volume.

In contrast, Person-to-Person (P2P) UPI transfers will remain free of any MDR, allowing users to continue trading without incurring additional costs. This exemption applies to platforms like WazirX and Binance P2P, where users can transact directly without the new fee impacting their trades.

Navigating the New Landscape

As the October 15 deadline approaches, users are advised to verify their deposit confirmations on exchange apps to ensure that the full amount is credited. It is crucial for users to conduct transactions only through the UPI option within the exchange app and avoid sending funds to unlisted Virtual Payment Addresses (VPAs), which pose significant risks.

The introduction of the MDR adds another layer of complexity to the already challenging regulatory environment for crypto trading in India. With a flat 30% tax on gains from Virtual Digital Assets (VDAs) and a 1% Tax Deducted at Source (TDS) on qualifying transfers, the cost of trading continues to rise.

The Road Ahead

The key question remains whether exchanges will absorb the 0.4% cost indefinitely, adjust trading spreads, or introduce a disclosed processing fee. As it stands, the burden of the MDR falls on the exchanges, not the consumers, but any changes in this policy could significantly impact the trading landscape.

With one month left before the new fee structure takes effect, exchanges and payment platforms are under pressure to update their billing systems and communicate changes to users. As the Indian crypto market evolves, users must stay informed and vigilant to navigate the shifting regulatory terrain.

Disclaimer: The information presented in this article is for informational purposes only and should not be considered financial advice. Always conduct your own research and consult with a qualified financial advisor before making investment decisions.