Complex priorities: On UPI transactions, MDR charges

The Merchant Discount Rate (MDR) charges announced for UPI transactions show how political considerations can dilute economic benefits. In a quest to preempt political attacks, the rate structure announced by the National Payments Corporation of India has been made overly complex. From October 15, the new rates will apply only to UPI payments of ₹2,000 or more made at merchants. As such, the charge is limited to only about 2.5% of all UPI transactions, which is a welcome limitation. Yet, within this, the rules have created different gradations. UPI payments made at small merchants earning less than ₹1 lakh a month are exempt. Those made to merchants operating in certain essential sectors will attract a flat MDR charge instead of the 0.4% applicable on other sectors. Capital market payments above ₹2,000 will attract a different MDR. These are clearly designed keeping political backlash in mind.