MDR charges announced: Who will pay how much for UPI transactions

The government unveiled the merchant discount rate (MDR) system for UPI transactions on Tuesday, exempting person-to-person payments from the charge irrespective of the transaction size. This implies that MDR will only apply to payments made to merchants, with a threshold of Rs 2,000 for its levy, except in specific cases like payments for essential services and capital market transactions.

The new MDR provisions will commence on October 15, giving acquiring banks, payment aggregators, fintech applications, and corporate accounting platforms ample time to adjust their systems. UPI transactions remain free for person-to-person transfers of any amount. Merchant payments up to Rs 2,000 remain charge-free, while those exceeding this limit will face a 0.4% MDR, capped at Rs 300 per transaction for payments over Rs 75,000.

High-value UPI payments to merchants over Rs 75,000 will see the 0.4% MDR capped at Rs 300. Essential service payments, such as railways, telecommunications, insurance, fuel, and agricultural inputs, will incur a flat MDR of Rs 5 per transaction. Mutual fund, securities, stockbroker, and dealer transactions will attract an MDR of 0.02%, also capped at Rs 300 per transaction.

Merchants receiving up to Rs 1 lakh per month through UPI QR codes under the P2PM category will not face MDR. The government did not specify the MDR levy for transactions above the Rs 1 lakh threshold.