Overview
- The government and the National Payments Corporation of India have set a Merchant Discount Rate for person-to-merchant UPI payments above Rs 2,000 that takes effect on October 15.
- The standard rate is 0.4% per eligible transaction capped at Rs 300, with a flat Rs 5 fee for railways, telecom, insurance, fuel and similar categories and a 0.02% rate for capital-market payments.
- All person-to-person UPI transfers, merchant payments up to Rs 2,000 and small merchants receiving up to Rs 1 lakh a month under the P2PM scheme remain exempt from MDR.
- Authorities say the charge will be collected from merchants and shared among banks, apps and the network, with 5% of collections earmarked for a small‑merchant fund and industry estimates projecting large revenue potential.
- Political leaders have criticised the change and a legal challenge seeks to quash the notifications, while regulators and banks must now police merchant pass-through and categorisation to protect consumers.