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NPCI Says New UPI MDR Will Spare Most Transactions
A new fee will apply to some large UPI payments made to businesses from October 15.
The fee is called the Merchant Discount Rate, or MDR.
It will usually be 0.4% for eligible payments above ₹2,000.
Payments between people will not have this fee.
Small payments and some small merchants will also remain exempt.
NPCI says about 96% of UPI payments will not be affected.
Some merchants and customers are worried that businesses might pass the fee on to shoppers.
NPCI and the government say merchants should not transfer the charge to customers.
The money collected is expected to help improve payment tools and technology.
A 0.4% MDR will apply from October 15 to specified merchant UPI payments above ₹2,000.
The fee will be capped at ₹300 for transactions of ₹75,000 or more.
NPCI CEO Dilip Asbe said about 96% of UPI transactions would remain unaffected.
Person-to-person payments, payments up to ₹2,000, and certain small merchants will remain exempt.
NPCI plans to use MDR revenue for soundboxes, artificial intelligence, voice payments, and other infrastructure.
- Who
- The National Payments Corporation of India and its Managing Director and CEO, Dilip Asbe, addressed the revised UPI MDR framework.
- What
- A 0.4% Merchant Discount Rate will apply to specified person-to-merchant UPI transactions above ₹2,000, with exemptions and transaction-specific rates.
- Where
- The announcement was discussed at the SBI Banking and Economics Conclave.
- When
- The revised framework is scheduled to begin on October 15; Asbe discussed it at the SBI Banking and Economics Conclave in 2026.
- Why
- NPCI says the revenue will support the digital payments ecosystem, while the organisation and the government are seeking to clarify concerns about charges being passed to customers.
NPCI and Government Position
Merchant and Customer Concerns
Effect on payment activity
NPCI and Government Position
Dilip Asbe said the framework is not expected to materially reduce UPI transaction volumes or value, and that volumes could grow as the ecosystem invests in new services.
Merchant and Customer Concerns
Some merchants began refusing UPI payments above ₹2,000 after the announcement, indicating concern about the effect of the new cost.
Passing charges to customers
NPCI and Government Position
NPCI and the government say the MDR should not be passed on to consumers, and banks have been directed to help prevent this.
Merchant and Customer Concerns
NPCI acknowledged that merchants who do not currently accept credit cards could face difficulties if they try to pass MDR costs to customers.
Who bears the cost
NPCI and Government Position
Asbe said much of the MDR would apply to merchants that already accept credit cards and already pay card-related charges.
Merchant and Customer Concerns
Merchants outside the existing credit-card-accepting group may be more sensitive to the new charge, especially businesses operating on thin margins.
Key facts
- Standard MDR
- 0.4% for specified person-to-merchant UPI transactions above ₹2,000.
- Fee cap
- ₹300 for transactions of ₹75,000 and above.
- Exempt payments
- Person-to-person transactions and person-to-merchant payments up to ₹2,000 remain outside the framework.
- Expected impact
- NPCI says about 96% of P2M transactions will remain unaffected.
- Special sectors
- Railways, telecommunications, insurance, fuel, and agricultural inputs will face a flat ₹5 MDR above ₹2,000.
- Capital markets
- Capital market transactions will carry a 0.02% MDR capped at ₹300.
- Infrastructure reach
- About 20 million merchants have soundboxes, while another 40 million have QR codes without soundboxes.
Quotes
Dilip Asbe
Managing Director and CEO of the National Payments Corporation of India
“About 75 percent of UPI merchants out of 60 million have never seen a transaction above Rs 2,000. If you look at this, 96 percent of the volume will not touch MDR. The 10 percent of merchants who might not accept credit cards… the ecosystem will have to ensure that the charges are not passed back to the customers”
freepressjournal.in
“I believe there is huge miscommunication and misinformation in the system. The NPCI ecosystem and the government are trying to provide clear information… we have done some part of the outreach, whatever it is, in our limited capacity”
freepressjournal.in
Sources
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