‘No question of rethinking 0.4% UPI MDR above ₹2,000’: Govt official | Finance News
The government has ruled out any revision of the 0.4 per cent Merchant Discount Rate (MDR) levied on UPI transactions above ₹2,000, PTI reported on Wednesday. The new charges are set to take effect from October 15.
A top government official, when asked whether the proposed MDR would be withdrawn, said a decision had already been taken and there was “no question of reversing it”, PTI reported.
According to PTI, sources said the decision was taken in the broader interest of the UPI ecosystem and to strengthen its safety and security. “The new MDR framework would make UPI financially self-sustainable,” government officials said.
The government has said the MDR will apply within the merchant payment ecosystem and will not be charged to consumers.
Individuals will continue to have unlimited free UPI usage, without monthly quotas, volume restrictions or tiered caps on free transactions, the government said on Tuesday.
The government has also said it will provide incentives for further expansion of digital payments in rural and semi-urban areas while keeping most UPI payments free.
Merchants show limited willingness to absorb MDR
The proposed charge has faced opposition from traders and businesses.
Only 17 per cent of merchants and businesses surveyed were willing to bear the proposed 0.4 per cent MDR on UPI transactions above ₹2,000, according to a LocalCircles survey of more than 32,000 respondents across 242 districts.
The survey found that 41 per cent of respondents would not bear any MDR, while another 9 per cent said they did not accept UPI payments.
Among the remaining respondents, 35 per cent were willing to bear an MDR of 0.1 per cent or more, while 25 per cent were willing to accept a rate of 0.25 per cent or higher. At 0.4 per cent, the proportion fell to 17 per cent, according to the survey.
An earlier LocalCircles survey found that 53 per cent of UPI users would move away from the payment method for transactions above ₹3,000 if merchants passed on the MDR.
Of these respondents, 27 per cent said they would shift to credit cards, 14 per cent to debit cards and 12 per cent to cash or bank transfers.
How the new UPI MDR framework will work
Under the new framework, MDR proceeds will be distributed among participants in the payments chain, including the remitter bank, acquiring bank, payment service provider bank, and UPI app. Payment aggregators will receive their share from the acquiring side.
According to the National Payments Corporation of India (NPCI), certain categories will have separate rates. UPI AutoPay and recurring mandates will remain outside the prescribed MDR. Payments above ₹2,000 in specified categories, including railways, telecom, insurance, fuel, electricity distribution, municipal water and piped natural gas, will attract a flat ₹5 MDR.
Capital-market transactions, including payments towards mutual funds, securities, stockbrokers and dealers, will attract an MDR of 0.02 per cent, capped at ₹300 per transaction.
NPCI will also establish a dedicated fund to support small merchants and digital-payment infrastructure in Tier III to Tier VI regions, including the north-eastern states, Jammu and Kashmir and Ladakh. The fund could receive about ₹700 crore annually, Business Standard reported.
(With inputs from PTI)
