The National Payments Corporation of India (NPCI) on Tuesday announced a revised Merchant Discount Rate (MDR) framework under which select person-to-merchant (P2M) UPI transactions above Rs 2,000 will attract a 0.4 per cent charge from October 15.
The new framework, however, will not impose a direct charge on consumers. Person-to-person (P2P) UPI transactions will remain free, while P2M transactions up to Rs 2,000 will also continue without MDR.
Under the revised structure, the MDR for eligible merchant transactions will be capped at Rs 300 for transactions of Rs 75,000 and above. For certain sectors, including railways, telecom services, insurance and fuel, a flat fee of Rs 5 will apply to transactions above Rs 2,000.
Small merchants receiving up to Rs 1 lakh a month through UPI QR payments directly into their bank accounts will be exempt from the MDR, according to the new framework. Capital market transactions will attract a separate MDR of 0.02 per cent, capped at Rs 300.
The move marks a shift in UPI's merchant-payment model, which has largely operated without MDR in recent years. NPCI said the revised framework is aimed at supporting the sustainability of the UPI ecosystem, including investments in infrastructure, cybersecurity and innovation.
The development comes after months of discussion over how to make the country's rapidly expanding digital payments infrastructure financially sustainable without imposing charges on consumers. Finance Minister Nirmala Sitharaman had said in August that consumers would not be charged for UPI transactions and that an MDR framework was yet to be finalised.
UPI processed around 24 billion transactions worth $311 billion in August, underlining its dominant role in India's digital payments ecosystem.
The government has also advised banks to ensure that the new merchant-side charges are not passed on to customers.
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