UPI payments above Rs 2,000 to attract 0.4% MDR: What users and merchants need to know
PTC Web Desk: UPI payments above Rs 2,000 made to merchants will now attract a 0.4% Merchant Discount Rate (MDR), according to new guidelines issued by the National Payments Corporation of India (NPCI).
The new rule applies only to merchant payments, meaning payments made by customers to shops, businesses or service providers. Regular UPI transfers between two individuals will remain free, regardless of the amount.
The changes come after the Centre announced that UPI transactions of up to Rs 2,000 would continue to have zero MDR.
Also Read | No charges to be levied on UPI payments up to Rs 2,000, says government
Under the new system, UPI merchant payments up to Rs 2,000 will have zero MDR.
Merchant payments above Rs 2,000 will attract an MDR of 0.4%.
UPI payments between two people will remain completely free.
For transactions of Rs 75,000 or more, the MDR will be capped at Rs 300 per transaction.
The charge will be divided among banks, payment apps and other companies involved in processing the payment.
What is MDR?
MDR stands for Merchant Discount Rate. It is a small processing fee charged to a merchant when a customer makes a digital payment. In simple terms, when you pay a shopkeeper digitally, the payment system may charge the shopkeeper a small amount for processing the transaction.
Customers usually do not pay MDR directly. However, in some payment systems, merchants may pass the cost on to customers.
UPI had no MDR since 2020
UPI payments have been free of MDR since 2020. The policy was introduced to encourage people and businesses to move away from cash and use digital payments. The latest decision changes that arrangement for larger merchant transactions, while keeping smaller UPI merchant payments free.
Special MDR for some sectors
The government has also introduced different charges for certain categories.
Payments above Rs 2,000 in sectors such as railways, telecom, insurance and fuel will attract a flat MDR of Rs 5 per transaction.
For payments related to mutual funds, securities, stock brokers and dealers, the MDR will be much lower at 0.02%, with a maximum charge of Rs 300.
Small vendors will continue to get relief
Small businesses and street vendors have been given special protection under the new rules. UPI QR-code transactions of up to Rs 1 lakh per month under the Person-to-Person-Merchant (P2PM) category will continue to have zero MDR.
The move is aimed at helping small and informal businesses adopt digital payments without facing additional costs.
What does this mean for ordinary UPI users?
For most people, the biggest point to remember is simple: sending money to another person through UPI will remain free.
If you pay a shop or business, payments up to Rs 2,000 will also continue without MDR. The new 0.4% MDR applies to merchant transactions above Rs 2,000, with specific rules and caps for certain sectors and transaction amounts.
The changes are mainly aimed at how larger merchant payments are processed and how the cost is shared across the digital payments ecosystem.
- PTC NEWS
