Last Updated:
The MDR on high-value merchant transactions will be capped at ₹300 per transaction for payments of ₹75,000 and above.
The government clarified that there will be no charges on P2P UPI transactions, irrespective of the transaction value.
UPI payments will continue to remain free for person-to-person (P2P) transactions, while a Merchant Discount Rate (MDR) of 0.4% will be levied on merchant transactions above ₹2,000, the government said on Tuesday.
According to the Ministry of Finance, the MDR on high-value merchant transactions will be capped at ₹300 per transaction for payments of ₹75,000 and above.
The government clarified that there will be no charges on P2P UPI transactions, irrespective of the transaction value.
P2P transactions account for around 37% of total UPI transactions by volume and nearly 70% by value, according to the ministry.
The government said banks have been advised to ensure that merchants do not pass MDR charges to customers for UPI payments.
Also Read | ‘India Could Become A Cash Economy Again’: Ashneer Grover On Possible UPI Charges Above Rs 2,000
MDR On Merchant Transactions
The Ministry of Finance said the 0.4% MDR collected on eligible UPI merchant transactions will be shared among various payment ecosystem partners, including banks and UPI app providers.
“Data analysis indicates that only 4 percentage of merchant transactions will be impacted by the MDR introduction, as the majority of transactions fall below the ₹2,000 threshold or qualify under the zero-MDR P2PM framework. This ensures that micro and small businesses remain shielded from cost burdens,” the ministry said in a statement.
Under the new framework, certain essential sectors will be subject to a flat MDR of ₹5 per transaction for payments above ₹2,000.
These sectors include railways, telecom, insurance, fuel and agriculture inputs, among others. The flat-rate structure is aimed at providing cost stability to critical public services and industries operating on thin margins.
The government said these industry programme categories account for nearly 17% of UPI P2M transaction volumes and approximately 46% of merchant transaction value.
Capital market transactions will attract an even lower MDR. Payments involving mutual funds, securities, stock brokers and dealers will carry an MDR of 0.02%, capped at ₹300 per transaction.
Meanwhile, small vendors covered under the Person-to-Person-Merchant (P2PM) framework will continue to enjoy zero MDR.
Under the framework, small merchants receiving up to ₹1 lakh per month through UPI QR codes will not be charged MDR on their transactions. The government said the provision is aimed at helping small and informal businesses transition to formal merchant acquiring systems and encouraging wider digital payment adoption in the unorganised sector.
The ministry also said a dedicated fund for promoting use of UPI by small merchants will be set up with contribution of 5% of total MDR collections. “This initiative will expand UPI acceptance, encourage sustained usage, and accelerate the inclusion of small businesses in India’s digital payments ecosystem,” it added.
Quick Answers
Ask News18UPI payments will continue to remain completely free for person-to-person (P2P) transactions, irrespective of the transaction value. The government has clarified that no charges will be levied on these transactions, which account for around 37% of total UPI transactions by volume and nearly 70% by value.
Ask News18About the Author
Saurabh Verma is a Deputy News Editor at News18.com, specialising in Indian politics and breaking global news. With years of experience tracking election strategies, he decodes domestic issues for mil…Read More
September 15, 2026, 6:54 PM IST
Read More
Source link
[ad_3]
