6 hrs ago
New UPI MDR Raises Questions About Merchant Payment Costs
The government has introduced a small fee for some UPI payments above Rs 2,000.
This fee is called Merchant Discount Rate, or MDR.
Businesses, rather than shoppers, are charged the fee.
Some people worry that businesses may pass the cost on to customers.
The government says only about 4% of merchant payments will be affected.
August data showed that many UPI payments were above Rs 2,000, but it did not clearly show how many of those payments were made to merchants.
Most UPI payments to merchants were small, while person-to-person transfers generally involved larger amounts.
Small merchants and street vendors can avoid MDR on up to Rs 1 lakh in monthly payments received in personal accounts.
A new 0.4% Merchant Discount Rate applies to specified UPI payments above Rs 2,000.
August recorded 2,451 crore UPI transactions worth Rs 29.82 lakh crore.
Person-to-merchant payments made up 63% of transaction volume but 30% of transaction value.
The Finance Ministry says about 96% of merchant transactions are below Rs 2,000 or covered by zero MDR.
The cited August data says 67% of transactions exceeded Rs 2,000, but a merchant-payment size breakdown is needed for a direct comparison.
- Who
- The government, merchants, small businesses, street vendors and UPI users are involved.
- What
- A 0.4% MDR was introduced for specified UPI payments above Rs 2,000.
- Where
- The change applies within India’s UPI payment system.
- When
- The government announced the change on Tuesday, September 15; the figures cited are for August.
- Why
- The policy changes how certain merchant UPI payments are charged, prompting concerns that businesses could pass costs to customers.
Government Position
Concerns About Impact
How many payments are affected
Government Position
The Finance Ministry says around 96% of UPI merchant transactions are below Rs 2,000 or covered by the zero-MDR framework, leaving about 4% subject to the charge.
Concerns About Impact
The report cites August data saying 67% of transactions were above Rs 2,000, raising questions about the government’s estimate; however, the data does not directly identify how many were merchant payments.
Effect on customers
Government Position
The policy charges merchants, and protections apply to eligible street vendors and small businesses receiving up to Rs 1 lakh monthly in personal accounts.
Concerns About Impact
Businesses may absorb the cost, change payment options or pass the additional charge to customers, potentially making some purchases costlier.
Key facts
- New MDR
- 0.4% on specified UPI payments above Rs 2,000
- August UPI volume
- 2,451 crore transactions
- August UPI value
- Rs 29.82 lakh crore
- Merchant-payment share
- 63% of UPI transactions by volume and 30% by value
- Person-to-person share
- 37% of transactions by volume and nearly 70% by value
- Government estimate
- About 96% of merchant transactions are below Rs 2,000 or covered by zero MDR
- Small-merchant protection
- No MDR on up to Rs 1 lakh received monthly in personal accounts for eligible merchants
Sources
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