New UPI MDR Structure Takes Effect October 15
The National Payments Corporation of India (NPCI) is set to introduce a new Merchant Discount Rate (MDR) framework for certain Unified Payments Interface (UPI) transactions. Effective October 15, a 0.4% MDR will be applied to Person-to-Merchant (P2M) UPI transactions exceeding ₹2,000. This move aims to implement a nominal charge for larger commercial digital payments while ensuring that everyday smaller transactions remain free for users and merchants.
Understanding the 0.4% Charge
Under the revised structure, any P2M UPI transaction where the payment amount is above ₹2,000 will incur a 0.4% MDR. This rate is designed to apply to commercial dealings, distinguishing them from personal transfers or smaller retail purchases. Significantly, all UPI transactions below the ₹2,000 threshold will continue to attract no MDR, maintaining their cost-free status for both established commercial merchants and individual users.
Cap on High-Value Transactions
To provide predictability and manage costs for businesses handling substantial payments, the new framework includes a cap on high-value transactions. For P2M UPI payments totaling ₹75,000 or more, the maximum MDR charge will be fixed at ₹300 per transaction. This means that a payment of, for instance, ₹1 lakh, which would otherwise attract a 0.4% charge of ₹400, will instead only incur the capped amount of ₹300.
Exemptions for Small Merchants
It is important to note that the introduction of MDR does not universally apply to all merchants. Small merchants operating in specific, exempted categories will not be charged merely for receiving payments above the ₹2,000 threshold. This ensures that the new fee structure targets larger commercial transactions without unduly burdening micro-enterprises.