NPCI sets 0.4% MDR on UPI merchant payments above Rs 2,000 from October 15

The National Payments Corporation of India (NPCI) will introduce a 0.4 per cent merchant discount rate (MDR) on specified Unified Payments Interface (UPI) payments to merchants above Rs 2,000 from October 15.

The new fee will apply to eligible person-to-merchant (P2M) transactions, according to an announcement by NPCI on Tuesday.

However, UPI payments between individuals will continue to remain free, irrespective of the transaction value. Merchant payments up to Rs 2,000 will also remain outside the MDR framework.

The move is aimed at creating a sustainable revenue stream for participants in the UPI payments ecosystem, including banks, payment service providers and UPI application providers.

The MDR is not a tax or a government charge. Instead, it is a fee distributed among participants involved in processing and facilitating merchant payments.

Under the new framework, most UPI merchant transactions will continue to remain unaffected, with around 96 per cent of P2M transactions expected to remain free.

For high-value merchant payments, the MDR will be capped at Rs 300 per transaction once the transaction value reaches Rs 75,000.

Small merchants covered under the zero-MDR framework will also continue to receive payments without MDR. The framework is intended to protect individuals and small businesses while supporting investment in India’s digital payments infrastructure.

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Customers will not be required to pay the MDR directly, with banks advised to ensure that merchants do not pass the charge on to customers.

The revised UPI fee structure comes as the digital payments ecosystem seeks a viable revenue model while maintaining UPI’s broad-based adoption across India.