Nirmala Sitharaman Clarifies UPI MDR Charge Rules
Finance Minister Nirmala Sitharaman has clarified that the new Merchant Discount Rate on specified UPI payments above ₹2,000 is not a government tax and cannot be passed on to customers. The 0.4% charge will instead be borne within the merchant and digital payments ecosystem.
UPI MDR Money Will Not Go to Government
Sitharaman said the MDR is neither a tax, cess nor surcharge and none of the money collected will enter the Consolidated Fund of India.
The charge compensates entities involved in processing UPI payments, including banks, the National Payments Corporation of India, payment aggregators, service providers and other participants in the transaction infrastructure.
From October 15, a 0.4% MDR will apply to specified person-to-merchant UPI transactions above ₹2,000.
Customers Will Not Pay UPI MDR
The Finance Minister stressed that merchants cannot add the MDR separately to a customer’s bill.
If a customer makes an eligible UPI purchase, the MDR will be treated as a business cost for the merchant and other payment ecosystem participants, similar to merchant charges already associated with card transactions.
Person-to-person UPI transfers will remain outside the MDR framework, while eligible merchant transactions of ₹2,000 or less will continue without the new charge.
MDR Capped at ₹300 for Large Transactions
For transactions of ₹75,000 and above, the MDR will be capped at ₹300. The government estimates that around 96% of merchant UPI transactions by volume will remain unaffected.
The clarification follows concerns among traders about the impact of MDR on business margins and fears that digital payments could become more expensive for consumers.
Sitharaman maintained that the revised framework is intended to support the financial sustainability of India’s expanding UPI infrastructure without imposing an additional payment charge on customers.
