MDR on UPI: What stays free, what attracts Rs 5 flat fee, and what 0.4% charges?
The National Payments Corporation of India (NPCI) has introduced a 0.4% merchant discount rate (MDR) on UPI transactions exceeding Rs 2,000, effective October 15. While person-to-person transfers remain free, the new fee structure applies to specific merchant payments, with a cap of Rs 300.
Why it matters
This policy shift impacts the cost structure of digital payments in India, balancing the sustainability of the UPI ecosystem with the needs of small merchants and consumers.
The National Payments Corporation of India (NPCI) on Tuesday announced a 0.4% merchant discount rate (MDR) on UPI transactions above Rs 2,000, subject to an overall cap of Rs 300. For utility payments, fuel purchases, insurance premiums, rail tickets and several government services, a flat charge of Rs 5 will apply.The MDR will have to be borne by merchants. Larger retailers, online platforms and restaurants, among others, may choose to absorb the cost. Cash transactions, meanwhile, also involve expenses, with several banks charging fees for cash deposits.The new MDR will take effect from October 15. However, UPI payments between individuals, including transfers made to friends, will continue to remain outside the charge. Auto-debits and UPI mandates will also not attract MDR.“Banks have been advised to ensure merchants do not pass MDR charges on to customers.
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