UPI payments above Rs 2000 to be chargeable after Oct 15: All questions answered
UPI payments are set to see a change soon. A new Merchant Discount Rate (MDR) will apply to some UPI payments above Rs 2,000 made to merchants. The government announced the new MDR on September 15, saying the charge is needed to cover the cost of running and maintaining the UPI payment system. The new rules will apply from October 15.
The matter has also reached the Supreme Court. On Monday, the court refused to put the new MDR on hold while hearing a petition challenging the decision. A bench headed by Chief Justice of India Surya Kant, along with Justices Joymalya Bagchi and V Mohana, has asked the Centre, the Reserve Bank of India and other parties to respond to the petition within four weeks.What is the new UPI charge?
Under the new rules, merchants will have to pay an MDR of 0.4 per cent on eligible UPI payments above Rs 2,000. However, the charge will be capped at Rs 300 for payments of Rs 75,000 or more.
This does not mean that the customer will have to pay an extra 0.4 per cent.
For example, if you pay Rs 3,000 to a shopkeeper through UPI, the MDR would be Rs 12. On a Rs 50,000 payment, it would be Rs 200. If you make a Rs 1 lakh payment, 0.4 per cent comes to Rs 400, but the merchant's charge will be limited to Rs 300.
The government has advised banks to ensure that merchants do not pass this charge on to customers.
UPI payments of Rs 2,000 or less will continue without the standard MDR. Payments between individuals will also remain free. So, sending Rs 5,000 to a friend or transferring money to a family member will not attract this charge.Which payments and merchants will be affected?
The new MDR mainly affects eligible payments made to merchants above Rs 2,000. However, some categories have been given different rates.
Railway payments, telecom services, insurance, fuel and agricultural inputs will have a flat MDR of Rs 5 for payments above Rs 2,000. Mutual funds, securities, stockbrokers and dealers will have an MDR of 0.02 per cent, with the charge capped at Rs 300.
Some recurring payments will not attract MDR. These include utility bills, OTT subscriptions, monthly investments and automated recurring payments.
Small merchants also get an exemption. Merchants receiving up to Rs 1 lakh a month through UPI QR payments will continue with zero MDR under the new framework.Why is the government introducing MDR now?
UPI has operated with zero MDR on these transactions for nearly six years. The government has now introduced the charge citing the rising cost of running the payment network.
The UPI system requires spending on technology, cybersecurity, fraud prevention and maintaining the infrastructure needed to process a huge number of transactions.
The move has, however, raised concerns among retailers. The Retailers Association of India has argued that the additional cost could put pressure on smaller businesses, especially those operating on thin margins. It has also raised concerns that some merchants could prefer cash if digital payments become more expensive for them.
For customers, the main point is that the new MDR is not a direct UPI transaction fee. From October 15, eligible merchant payments above Rs 2,000 will carry a charge on the merchant side, while person-to-person UPI payments and payments of up to Rs 2,000 will continue without the new standard MDR.- EndsAlso Read | Sridhar Vembu says Zoho built its own cloud, now offering it free to studentsAlso Read | UPI payments above Rs 2,000: 76% users may move to cash, cards if MDR is passed onAlso Read | Apple announces up to Rs 15,000 discount offers on MacBook Pro, iPhone 18 Pro and more
Ankita Garg is a tech journalist with more than 9 years of experience. She is always curious about new gadgets and loves writing about them. When not writing, you will find her painting or sketching.
