Merchant Discount Rate Update for UPI Transactions

The National Payments Corporation of India (NPCI) has postponed the enforcement of the merchant discount rate (MDR) on specific Unified Payments Interface (UPI) transactions until after Diwali. A new date for implementation will be communicated in due course. This decision was made by the UPI and Services Steering Committee on October 13, taking into consideration the festive period. The implementation was initially set to begin on October 15.

Details of the Revised MDR Framework

According to the framework revealed on September 15, a 0.4% MDR will be applied to qualifying person-to-merchant (P2M) UPI transactions that exceed Rs 2,000. This charge will be limited to Rs 300 for transactions of Rs 75,000 and more.

Sector-Specific Transaction Charges

For transactions above Rs 2,000 in designated sectors, including railways, telecommunications, insurance, fuel, and agricultural inputs, a flat MDR of Rs 5 will apply. Additionally, capital market transactions will incur an MDR of 0.02%, with a cap of Rs 300 per individual transaction.

Preservation of Free Transactions

Person-to-person (P2P) transfers and merchant payments that do not surpass Rs 2,000 will continue to be free of charge. Small merchants participating in the person-to-person merchant (P2PM) framework will also remain exempt from the MDR. The government has stated that nearly 96% of merchant transactions will not be affected by the revised rules, and merchants will be prohibited from passing the MDR onto customers.

Purpose of the Framework

This framework is designed to bolster the sustainability of the UPI ecosystem and facilitate investments in payment infrastructure, security, and merchant acceptance networks. The fees will be allocated among those involved in the payment ecosystem rather than being collected as tax revenue by the government or NPCI.