Noida, Sep 25 (APAC Media): The rules around UPI payments are set to change from October 15, with a new Merchant Discount Rate (MDR) being introduced on certain high-value transactions. While the move will affect some merchants, ordinary customers will continue to make UPI payments without paying the MDR.
Step 1: What is changing?
From October 15, eligible person-to-merchant (P2M) UPI transactions above ₹2,000 will attract an MDR of 0.4 per cent. The charge whhill apply to the merchant side of the transaction and is not a fee that customers will directly pay.
Step 2: How much will merchants pay?
The MDR will be calculated at 0.4 per cent for eligible transactions. For example, a merchant receiving a ₹3,000 UPI payment would attract an MDR of ₹12. On a ₹50,000 transaction, the charge would be ₹200.
For transactions of ₹75,000 and above, the MDR will be capped at ₹300. Therefore, even though 0.4 per cent of ₹1 lakh is ₹400, the applicable charge would be limited to ₹300.
Step 3: Will customers be charged?
No. Customers will not have to pay the MDR when making eligible UPI payments. The new charge is aimed at the merchant side of the digital-payment ecosystem.
Person-to-person UPI transfers, such as sending money to friends or family members, will also continue to remain free.
Step 4: What about UPI AutoPay?
Recurring payments made through UPI AutoPay will not attract the prescribed MDR. This includes payments such as subscriptions, utility bills and certain recurring investment-related transactions.
Step 5: Will small merchants be affected?
Small merchants will receive an exemption under the new arrangement. Merchants classified under the P2PM category and receiving up to ₹1 lakh a month directly through UPI QR codes will not be subject to the MDR.
This means a small merchant could receive an individual payment above ₹2,000 without paying MDR, provided the merchant remains within the applicable monthly threshold.
Step 6: Are there special rates for some sectors?
Yes. Certain categories will have separate charges. Transactions above ₹2,000 in sectors such as railways, telecom, insurance, fuel and selected utility services can attract a flat ₹5 charge.
Capital-market transactions will have a separate MDR of 0.02 per cent, with the charge capped at ₹300.
Step 7: Why is the MDR important?
The introduction of MDR represents a change from the largely zero-MDR structure that has supported UPI merchant payments. The charges are designed to form part of the payment ecosystem rather than being collected by the government as a tax.
NPCI CEO Dilip Asbe has said that around three-fourths of digital-payment-accepting merchants have never recorded a transaction above ₹2,000.
For consumers, the new framework is expected to have limited direct impact, as UPI transactions will continue to remain free for users. However, eligible merchants will have to factor in the applicable processing charges on qualifying transactions from October 15.
–ENDS–
Disclaimer: This article is for informational purposes only and is based on publicly available information. APAC Media is not responsible for investment decisions or losses. Please conduct your own research or consult a financial adviser before investing.
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