UPI MDR: ‘Not a single penny’ will go to govt; earnings to be shared among banks and other entities, says report
The new MDR is scheduled to come into effect from October 15 and will apply only to merchants accepting UPI payments exceeding ₹2,000.
The proposed merchant discount rate (MDR) of 0.4% on UPI payments over ₹2,000 will not impose any extra expense on consumers, according to government sources cited by news agency PTI. Effective from October 15, the new MDR will only apply to merchants accepting UPI transactions exceeding ₹2,000, while person-to-person UPI transfers will remain free, regardless of value.
Government officials emphasized that none of the MDR revenue will be transferred to the government; instead, it will be shared among banks and entities involved in processing UPI payments, with allocations of 40% to consumer banks, 30% to payment gateways, 20% to UPI apps, and 10% to sponsoring banks. Merchants will bear the cost of the MDR, not consumers.
Person-to-person UPI transfers, as well as payments below ₹2,000 and small merchant transactions under ₹1 lakh monthly, will remain exempt from the new fee. The UPI MDR aims to create a sustainable revenue model for the digital payments system, covering costs like infrastructure, cybersecurity, and customer support.
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