There's good news for UPI payment users. The proposal to charge merchants a 0.4% merchant discount rate (MDR) on UPI transactions exceeding ₹2,000 has reportedly been postponed until Diwali. The National Payments Corporation of India (NPCI) reportedly made this decision keeping the festive season in mind. However, the exact date for implementing this charge has not yet been announced.

What is MDR charge?

MDR stands for Merchant Discount Rate. MDR is the charge that merchants must pay to banks or payment service providers for accepting digital payments. According to the proposal, this charge will be levied on eligible merchants rather than customers. It is stated that UPI payments made from one person to another will remain free.

Important things to know about UPI MDR charges

1. 0.4% charge on transactions above Rs 2,000 - Under the proposed rules, eligible large merchants may have to pay 0.4% MDR and 18% GST on every UPI transaction above Rs 2,000.

2. Relief to small traders - The proposal provides for exemption from this charge for small traders who accept transactions up to ₹1 lakh per month through UPI.

3. Transaction limit of ₹75,000 or more – It is proposed to levy ₹300 MDR and GST on such transactions.

4. Rs 5 charge for some sectors - It is reported that in some sectors like petrol pumps, railways, telecom, insurance and bill payments, there is a proposal to charge Rs 5 instead of 0.4% on transactions above Rs 2,000.

5. Transactions up to ₹2,000 – The proposal states that MDR charges will not be applicable on transactions up to this limit for eligible merchants.

What will be the impact on UPI users? There is no proposal to impose a direct charge on UPI payments made by ordinary customers. However, the cost for merchants may change. The government
has reportedly spent ₹8,276 crore under the UPI Incentive Scheme from 2021-22 to 2024-25. 

PC: Naya India