A new Merchant Discount Rate (MDR) framework for some UPI transactions will take effect from October 15, but consumers will not be charged directly. For direct UPI payments to merchants above Rs 2,000, an MDR of 0.4% will apply, with the merchant paying the acquiring bank. The charge will be capped at Rs 300 for transactions of Rs 75,000 or more.
For example, a Rs 3,000 payment would attract Rs 12 in MDR, while a Rs 50,000 payment would attract Rs 200. The customer would continue paying only the billed amount, and merchants cannot add the MDR as a separate UPI surcharge.
Person-to-person transfers will remain free, while P2M payments of Rs 2,000 or less will continue without MDR. These smaller transactions account for more than 95% of P2M UPI transaction volume.
Certain sectors will have different rates. Railways, telecom, insurance, fuel, electricity, water and piped gas payments above Rs 2,000 will attract a flat Rs 5 MDR. Capital-market transactions will carry a 0.02% rate, capped at Rs 300.
Eligible small merchants receiving up to Rs 1 lakh a month through UPI QR codes will continue to receive zero MDR under the P2PM framework.
The government says the framework is intended to create a sustainable funding model for UPI infrastructure, cybersecurity and digital-payment services. While consumers will not pay the fee directly, businesses will decide how to absorb the additional cost within their operations.
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