UPI Transaction: Here is important news for those who make payments via UPI. The National Payments Corporation of India (NPCI) has determined a new structure for the Merchant Discount Rate (MDR) on UPI. Under the proposed system, an MDR of up to 0.4% will apply to certain merchant transactions exceeding ₹2,000, with a maximum cap of ₹300. However, for certain essential services, a flat MDR of ₹5 has been set instead of a percentage-based rate.
Crucially, this charge will not be levied on customers; instead, it must be paid by the merchant—that is, the shopkeeper or service provider. The new system is scheduled to come into effect on October 15.
Which services will attract an MDR of only ₹5?
For select merchant categories—such as railways, telecom, insurance, fuel, and certain utility payments—a flat MDR of ₹5 will apply to UPI transactions exceeding ₹2,000, rather than the 0.4% rate. This means that regardless of how high the transaction amount is, the MDR for these specific categories will remain fixed at ₹5.
Insurance Premiums:
A flat MDR of ₹5 will apply to insurance premium payments exceeding ₹2,000.
Petrol and Diesel Purchases:
An MDR of ₹5 has been set for UPI payments exceeding ₹2,000 at petrol pumps. There will be no such charge for payments up to ₹2,000.
Electricity, Water, and Piped Gas:
A flat MDR of ₹5 will also apply to utility bill payments exceeding ₹2,000. The MDR will be zero for payments up to ₹2,000.
P2P UPI Transfers Will Remain Free
If you send money to a friend, relative, or any other individual via UPI, no MDR will be charged on Person-to-Person (P2P) transfers. Similarly, no MDR will be levied on recurring payments such as auto-debit and UPI Mandate transactions.
Why was this change made? The flat-fee structure aims to keep the cost of digital payments contained within relatively low-margin sectors such as railways, utility bills, fuel retail, and insurance. This is an effort to cap the cost of UPI-based payments for these services.
Consequently, the impact of the MDR will primarily fall on the merchant; customers will not face any direct additional charges for UPI payments.
