Reserve Bank of India (RBI) Governor Sanjay Malhotra said on Wednesday that the new merchant charges on Unified Payments Interface (UPI) transactions are a small fee that will not adversely impact the momentum of the country’s digital payments.
RBI Governor on UPI MDR: ‘I Don’t Personally Think a Small Fee Will Have Any Impact’
“MDR decision has already been taken. As of now, we do not see any drop in volumes. I don’t personally think a small fee will have any impact on UPI volumes,” Malhotra said in response to a media query at a press conference here after the RBI’s monetary policy announcement.
UPI MDR From October 15: Which Transactions Will Be Affected?
The RBI Governor’s remarks come about a week before the new payment framework related to UPI transactions goes live. From October 15 onwards, a Merchant Discount Rate (MDR) of 0.4 per cent will apply to select person-to-merchant UPI transactions exceeding Rs 2,000.
The government has stressed that the new UPI framework has no impact on any person-to-person transactions. UPI will continue to remain completely free for all person-to-person transactions, irrespective of the amount transferred.
Payments to merchants up to Rs 2,000, along with transactions covered under the zero-MDR framework for small merchants, will also remain free. Consequently, approximately 96 per cent of all P2M transactions will remain unaffected. MDR will apply only to specified merchant transactions above Rs 2,000.
UPI Charges: Customers Will Not Pay MDR Directly
The Finance Ministry clarified that MDR is neither a tax nor a charge collected by the government or the NPCI. It is distributed among payment ecosystem participants, including banks and payment application providers, to support the operation and continued expansion of the UPI ecosystem.
A nominal MDR of 0.4 per cent will apply only to P2M transactions above Rs 2,000. The MDR will be shared among payment ecosystem participants, including banks, payment service providers, and UPI application providers. For transactions of Rs 75,000 and above, the MDR will be capped at Ts 300 per transaction.
₹5 MDR for Railways, Telecom, Insurance and Fuel Transactions
Transactions above Rs 2,000 in essential and thin-margin sectors, including railways, telecommunications, insurance, fuel, and agricultural inputs, will attract a flat MDR of Rs 5 per transaction. The flat charge will provide cost certainty for critical public services and businesses operating on narrow margins.
Read More:
UPI payments up to Rs 2,000 to remain free of bank charges: Govt
RBI MPC Meeting Begins: Rate Hike Looms as Inflation and Crude Prices Rise
