A new fee has been announced for certain UPI transactions above ₹2,000 made to businesses in India. A 0.4% Merchant Discount Rate (MDR) will apply to eligible business transactions from the 15th of next month, according to the announcement. The new rule is expected to affect businesses that regularly receive high-value payments through the Unified Payments Interface (UPI). However, the fee will not be directly charged to customers. Instead, eligible merchants will pay the applicable fee to the banks and payment service providers handling the UPI transaction. UPI was introduced in India in 2016 and has become one of the country’s most widely used digital payment systems. It has made it easier for people to make instant payments using mobile phones and has also helped small businesses, shops and street vendors accept digital payments without relying heavily on cash. Under the newly announced structure, transactions above ₹2,000 in selected sectors will attract a 0.4% fee. For essential and low-margin sectors such as railways, telecommunications, insurance, petrol, diesel and agricultural products, a fixed charge of ₹5 has been specified for transactions above ₹2,000. The fee structure was reportedly decided after discussions involving representatives from banks, payment service providers and other industry bodies.
The National Payments Corporation of India (NPCI), which operates the UPI infrastructure, has announced the changes. For example, if an eligible business transaction is worth ₹5,000, a 0.4% MDR would amount to ₹20, subject to the applicable rules and caps. The charge is intended for the merchant side of the transaction rather than being collected directly from the customer. UPI payments have played an important role in India’s shift toward digital transactions. From large retailers and online businesses to small roadside shops, many businesses now use QR codes to accept payments. The new MDR structure is therefore expected to attract close attention from merchants, banks and payment companies. Businesses may review their payment costs once the new charges come into effect, while customers can continue to use UPI according to the applicable payment rules.
