The free UPI window has been narrowed, with the government introducing a flat levy of Rs 5 on select transactions worth over Rs 2,000. For large merchant payments above Rs 2,000, a levy of 0.4% will be imposed. This fee, however, will be capped at Rs 300, the National Payments Corporation of India (NCPI) said in a statement on Tuesday.
The new UPI fee rules will come into effect from Oct. 15.
Select merchant categories, including railways, telecom services, insurance and fuel, will attract a flat MDR of Rs 5 per transaction for UPI payments above Rs 2,000.
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Capital-market payments, including transactions involving mutual funds, securities, stock brokers and dealers, will attract a significantly lower MDR of 0.02%, subject to a cap of Rs 300 per transaction.
The new framework is expected to have a limited impact on overall UPI usage, with only around 4% of merchant transactions expected to be affected. More than 95% of UPI P2M transactions will remain outside the MDR framework. Small merchants operating under the P2PM model will continue to enjoy zero MDR.
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There will also be no monthly quota or cap on free UPI usage for individual users, meaning consumers can continue to make UPI payments without an MDR charge on transactions within the applicable free framework.
The revised MDR structure will also create a dedicated fund to support UPI acceptance among small merchants. Five per cent of total MDR collections will be allocated to the fund to promote wider adoption of UPI among smaller businesses.
MDR revenue will be shared among players across the UPI ecosystem and is expected to support areas such as UPI expansion, cybersecurity and innovation. The revised UPI MDR rates are also expected to remain lower than charges applicable to cards and digital wallets.
Banks have been advised to ensure that merchants do not pass on the MDR costs to customers. As a result, merchants attracting MDR under the new framework are not expected to impose an additional charge on consumers for making UPI payments.
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