P2M Meaning in UPI: How It Differs From P2P

Published: 7 October 2026

P2M means Person-to-Merchant. In UPI, a P2M transaction is a payment made by a person to a merchant, such as paying a shop or business through UPI. P2P means Person-to-Person and refers to a transfer from one individual to another.

The difference matters because UPI merchant-charge rules do not treat every type of payment the same way. Under the 2026 Merchant Discount Rate (MDR) framework, P2P transactions remain free, while qualifying P2M transactions above ₹2,000 can attract MDR, subject to the applicable merchant category and transaction rules.

So, if you are trying to understand the meaning of a P2M transaction in UPI, the simplest distinction is this: P2P is person-to-person, while P2M is person-to-merchant. The sections below explain the difference, examples of each type and how the MDR framework applies.

What Does UPI P2P Mean?

P2P stands for Person-to-Person. NPCI describes P2P transactions as payments made from one person to another.

A typical P2P payment is a transfer to another individual, such as sending money to a family member or friend. Transfers between a person's own linked bank accounts are also addressed as self-transfers in the official MDR FAQ.

Under the 2026 MDR FAQ, P2P transactions continue to be free for both the payer and the beneficiary. The FAQ states that no charges apply to a person transferring or receiving money through UPI in a P2P transaction.

What Is a P2M Transaction in UPI?

P2M stands for Person-to-Merchant. NPCI uses the term for payments made by a person to a merchant.

When a customer uses UPI to pay a shop, business or other merchant for a purchase, the payment falls into the P2M category rather than P2P.

The 2026 MDR framework specifically applies to P2M UPI transactions. Under the standard rule, a 0.4% MDR applies to P2M transactions above ₹2,000, while transactions of ₹75,000 and above are subject to a maximum MDR of ₹300 per transaction.

UPI P2P vs P2M: Key Differences

The key difference for MDR purposes is the recipient category. P2P is a person-to-person transfer, while P2M is a payment to a merchant.

Does UPI MDR Apply to P2P Payments?

No. The Department of Financial Services' official MDR FAQ states that P2P transactions will continue to be free of cost for both the payer and beneficiary.

This means the new merchant MDR framework should not be used to calculate a charge on a normal P2P transfer. The 0.4% MDR rule is specifically tied to P2M transactions covered by the framework.

Does UPI MDR Apply to P2M Payments?

Yes, the 2026 framework introduces MDR for qualifying P2M UPI transactions above ₹2,000.

For a qualifying P2M transaction between ₹2,000 and ₹75,000, the standard MDR calculation is 0.4% of the transaction value.

For example:

₹10,000 × 0.004 = ₹40

For a qualifying transaction of ₹75,000 or more, the MDR is capped at ₹300 per transaction. Therefore, a ₹1,00,000 qualifying P2M payment does not produce a ₹400 MDR under the standard calculation; the applicable cap is ₹300.

What Happens to P2M Payments of ₹2,000 or Less?

The official FAQ states that there is no impact on small-value UPI transactions up to ₹2,000. Its exact transaction examples also show ₹2,000 with MDR of ₹0.

Therefore, a qualifying P2M transaction at ₹2,000 does not attract the standard 0.4% MDR. The 0.4% rate begins above the ₹2,000 threshold under the standard P2M framework.

Are All P2M Payments Charged at 0.4%?

No. The 0.4% figure is the standard rate described for P2M transactions above ₹2,000, but the official framework also identifies transaction and merchant categories with different treatment.

For example, the FAQ provides a separate flat MDR structure for specified merchant categories, including fuel, insurance, telecom services and railways. It also separately provides a capital-market MDR framework.

So, identifying a payment as P2M does not by itself mean that 0.4% must be applied in every case. The relevant merchant category and transaction rules must also be considered.

Where Does P2PM Fit In?

P2PM is a separate term used in the 2026 MDR framework for a specialized category of small merchants. The official FAQ describes P2PM as Person-to-Person-Merchant and explains that it is intended for small vendors receiving payments directly into their accounts.

The FAQ states that small merchants operating under the P2PM framework will continue with zero MDR, subject to the applicable P2PM conditions. It also states that MDR applicability for a payment above ₹2,000 depends on the merchant's overall account categorisation.

This is why the terms P2P, P2M and P2PM should not be treated as interchangeable. P2P refers to person-to-person payments, P2M refers to person-to-merchant payments, and P2PM is a specialized small-merchant category described separately in the official MDR framework.

For the detailed rules on small shops and the ₹1 lakh monthly P2PM threshold, see Does UPI MDR Apply to a Small Shop?

Why the P2P and P2M Distinction Matters for MDR

The 2026 framework does not introduce one universal MDR charge across all UPI transactions. Instead, its merchant MDR provisions specifically address P2M transactions, while the FAQ separately confirms that P2P transfers remain free.

This means the type of payment should be identified before applying any MDR calculation. A transfer to another person is not treated the same way as a payment to a merchant simply because both payments use UPI.

How Can You Tell Whether a UPI Payment Is P2P or P2M?

The simplest distinction is the recipient.

• P2P: You are transferring money to another person, such as a friend or family member.
• P2M: You are paying a merchant for goods or services.

For MDR purposes, the next question is whether the P2M payment falls within the standard MDR rule or another category covered by the official framework.

UPI P2P and P2M FAQs

What Is P2P in UPI?

P2P means Person-to-Person. It refers to UPI payments made from one person to another person. NPCI's UPI material defines P2P transactions as person-to-person payments.

What Is P2M in UPI?

P2M means Person-to-Merchant. It refers to UPI payments made by a person to a merchant.

Is P2P UPI Free After 15 October 2026?

Yes. The official 2026 MDR FAQ states that P2P transactions will continue to be free for both the payer and beneficiary.

Does P2M UPI Have MDR After 15 October 2026?

Qualifying P2M transactions above ₹2,000 are subject to the standard 0.4% MDR, with a ₹300 cap for transactions of ₹75,000 and above. Certain categories have different MDR treatment.

Is There MDR on a ₹2,000 P2M Payment?

No. The official FAQ states that transactions up to ₹2,000 are not affected by the MDR framework, and its transaction examples show ₹2,000 with MDR of ₹0.

Is a Payment to a Small Vendor Always P2M?

A payment made to a merchant falls within the merchant-payment framework, but the 2026 FAQ separately provides the P2PM category for qualifying small merchants. MDR applicability can therefore depend on the merchant's account categorisation.

Does P2M Always Mean a 0.4% MDR?

No. The standard rate is 0.4% for qualifying P2M transactions above ₹2,000, but the official framework also contains separate treatment for specified merchant and transaction categories.

Conclusion

P2P and P2M are two different UPI transaction categories. P2P means Person-to-Person, while P2M means Person-to-Merchant.

Under the 2026 MDR framework, P2P transactions remain free, while qualifying P2M transactions above ₹2,000 are subject to the applicable merchant MDR rules. The standard P2M rate is 0.4%, with a ₹300 cap for transactions of ₹75,000 and above.

The distinction matters because the MDR framework is not a blanket charge on all UPI payments. Before calculating MDR, a merchant payment should be considered under the appropriate transaction and merchant category described in the official framework.