The MDR will have to be borne by merchants. Larger retailers, online platforms and restaurants, among others, may choose to absorb the cost.
4% merchant discount rate (MDR) on UPI transactions above Rs 2,000, subject to an overall cap of Rs 300. For utility payments, fuel purchases, insurance premiums, rail tickets and several government services, a flat charge of Rs 5 will apply.
The MDR will have to be borne by merchants. Larger retailers, online platforms and restaurants, among others, may choose to absorb the cost.
Cash transactions, meanwhile, also involve expenses, with several banks charging fees for cash deposits. The new MDR will take effect from October 15.
However, UPI payments between individuals, including transfers made to friends, will continue to remain outside the charge. “Banks have been advised to ensure merchants do not pass MDR charges on to customers.
UPI application providers are expressly prohibited from imposing platform fees or hidden charges,” the finance ministry said in a statement. If you are still wondering what transactions will be subject to what charge, we break it down for you: UPI Transactions: What Remains FreeAll Person-to-Person Transactions: UPI transfers made directly between individuals will continue to be completely free, regardless of the amount involved.
Individuals will not be charged a transaction fee, platform fee or any other fee for sending or receiving money through UPI. As a result, transactions between individuals, which account for 70% of the total UPI transaction value, will remain outside the MDR framework.
Payments Received by Small Merchants: Small merchants, including street vendors, who receive up to Rs 1 lakh a month through UPI QR codes under the Person-to-Person-Merchant (P2PM) category will continue to get zero MDR on all their transactions. This will ensure that street vendors, neighbourhood shops and other small businesses do not face additional costs for accepting digital payments.
Flat MDR for These UPI Transactions: Certain merchant categories, including railways, telecom services, insurance and fuel, among others, will attract a flat MDR of Rs 5 for transactions above Rs 2,000. 4% variable rate, these sectors will pay a fixed Rs 5 per transaction irrespective of the transaction value.
4% MDR but Rs 5 which again is not borne by you but the merchant. The flat-fee structure is intended to prevent transaction costs from rising in critical public services, utility bill collection and low-margin sectors such as fuel retail.
