MDR charges explained: who will pay how much for UPI?
New regulations for UPI payments introduce a 0.4% merchant discount rate (MDR) for person-to-merchant transactions exceeding Rs 2,000. While small merchants and individual transfers remain exempt, the policy aims to formalize fees for larger digital transactions.
Why it matters
This change impacts the cost structure of digital payments in India, potentially affecting how businesses and consumers utilize UPI for higher-value transactions.
From October 15, some UPI payments will stop being free for the people who receive them. The rules come from two places. On September 14, the Finance Ministry issued a notification under Section 10A of the Payment and Settlement Systems Act, 2007. It kept UPI payments of up to Rs 2,000, and RuPay debit cards, free of any bank or system charge. A day later, the steering committee led by the National Payments Corporation of India (NPCI) announced what happens above that line.Much of the reaction has been noise, so the details are worth setting out first.Who pays, and how muchThe charge is a merchant discount rate, or MDR. It is the fee a business pays for accepting a digital payment, and it is common with cards.
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