Proposed MDR for UPI transactions will be nominal, says government

The government has stated that the proposed merchant discount rate (MDR) for UPI transactions will be nominal and only apply to a select group of merchants for transactions exceeding a certain threshold. This news was conveyed on Saturday, with assurances that all person-to-person transactions will continue to be free for users. The vast majority of UPI transactions would remain fee-free for merchants.

The Merchant Discount Rate, if implemented, would be contingent on a threshold and not imposed on all transactions. The UPI and Services Steering Committee, led by the National Payments Corporation of India (NPCI), will determine the MDR, if any, according to the statement. Reports suggesting that the US might have influenced the decision by advocating for MDR on credit card and debit card transactions, which typically range from 2%, have been dismissed.

The government's move is part of its broader strategy to ensure the sustainability, competitiveness, and capacity of India's digital payment infrastructure, particularly in rural and semi-urban regions. The finance ministry considers the MDR necessary to expand the infrastructure to underserved areas. Officials have hinted that an MDR of 0.25% to 0.4% might be permissible for UPI transactions above Rs 2,000, excluding person-to-person transactions, with a cap on the charge.