UPI Payment System to Introduce Merchant Discount Rate on Select Transactions

India's Unified Payments Interface (UPI) system is set to implement a Merchant Discount Rate (MDR) on certain transactions from October 15, marking a shift towards a more sustainable financial model for the platform. The new framework introduces a 0.4% MDR for person-to-merchant (P2M) UPI transactions valued above ₹2,000.

This charge will be capped at ₹300 for transactions of ₹75,000 or more. Crucially, person-to-person (P2P) payments will remain free for consumers. The MDR is a merchant-side charge, and UPI apps are prohibited from levying any additional platform fees for UPI transactions.

Small merchants receiving up to ₹1 lakh per month through UPI QR codes will continue to be exempt from MDR. Additionally, specific sectors like railways, telecom, insurance, fuel, and utilities will benefit from a lower, fixed MDR of ₹5 for transactions above ₹2,000.

Payments related to capital markets, including mutual funds and stock transactions, will follow a separate structure with a 0.02% MDR and a ₹300 cap. Credit card transactions made via UPI will operate under different rules and are not subject to this specific MDR framework.