New UPI Merchant Fees
India Weighs Merchant Discount Rates on High-Value UPI Transactions for October Rollout
Anonymous
Key Points
1
The NPCI-led committee was already meeting and aimed to issue the MDR circular quickly; one participant said, “They want to push out the circular as soon as possible.”
2
The Finance Ministry notification invokes Section 10A of the Payment and Settlement Systems Act and says, “No bank or system provider shall impose, whether directly or indirectly, any charge upon a person making or receiving a payment by using the electronic mode of payment.”
3
Any proposed MDR would apply to eligible merchant transactions, while higher-value person-to-person UPI payments would remain free under the arrangements described in the report.
4
The report distinguishes UPI from NEFT for large transfers: UPI generally works through a QR code or mobile number, whereas NEFT requires the beneficiary’s account number, bank name and IFSC for the first transfer and is commonly used for rent, utility bills, loan instalments and salaries.
5
A report identified Congress leader Rahul Gandhi as one of the critics challenging the Centre over the proposed MDR, adding a specific political voice to the broader opposition described in the summary.
India is moving forward with a merchant discount rate on high-value UPI payments, with the government aiming for an October 15 rollout. OMIE Com News reports that the National Payments Corporation of India will levy fees on merchant transactions above ₹2,000, while keeping payments up to ₹2,000 and RuPay debit cards completely free. A Finance Ministry notification issued September 14 bars banks and payment providers from charging users directly, but the new framework targets big commercial transactions to fund infrastructure and security upgrades.
The fee structure could generate ₹1,500 crore to ₹2,400 crore monthly. Newsbytes notes that 96% of person-to-merchant transactions will stay free, but transactions above ₹2,000—which make up just 2.5% of UPI payments by count but 67% of merchant value—will face charges of 25 to 40 basis points. A 22-member NPCI steering committee has been meeting to finalize fee distribution rules, with one participant saying the group wants to "push out the circular as soon as possible."
Small Merchants Get Protected Under New Rules
The revised framework shields small vendors from the fee structure. Business Today reports that small merchants receiving up to ₹1 lakh monthly will remain exempt at 0% MDR, even on transactions above ₹2,000. Essential services—railways, telecom, insurance, fuel, and utilities—face only a flat ₹5 fee on high-value payments. Capital market investments carry a reduced 0.02% MDR. Person-to-person transfers stay completely free regardless of amount.
Political Opposition Labels Plan a Hidden Tax
Congress leaders are attacking the proposal as a backdoor digital payments tax. Rediff reports that Congress General Secretary Jairam Ramesh argued the September 14 notification offers "NO explicit protection for any transaction above this cap," setting the stage to charge for all digital payments. Party leader Rahul Gandhi accused the government of surrendering to foreign pressure, asking: "Where will the fees imposed on shopkeepers ultimately come from? Added to the prices, straight out of the customer's pocket."
Ashneer Grover, former co-founder of fintech firm BharatPe, warned that any UPI levy is "just tax collection" that will undermine India's shift toward a cashless economy. Critics argue merchants will pass fees to consumers through higher prices, negating the benefit of free digital payments for ordinary users. The government has advised banks to prevent merchants from surcharging buyers, but enforcement remains unclear.
How the Fee Structure Will Work Across Industries
Standard merchant payments above ₹2,000 will attract a 0.40% (40 basis points) MDR, capped at ₹300 for transactions of ₹75,000 and above. Newsbytes clarifies that UPI differs from NEFT for large transfers: UPI uses QR codes or mobile numbers, while NEFT requires account details and is commonly used for rent, utility bills, loan instalments, and salaries. The new rules apply only to specified merchant transactions, leaving person-to-person UPI transfers untouched.
Infrastructure Gains Pitched as Reason for Sustainable Model
The NPCI and industry supporters frame the fee structure as essential for ecosystem health. Business Today reports the new framework aims to create sustainable funding for infrastructure, cybersecurity, innovation, and customer service. Banks and fintech acquirers have faced significant operational costs since 2020 under the zero-MDR mandate. The government and NPCI portray this as a targeted, equitable model that preserves free access for ordinary citizens and small vendors while monetizing large commercial flows to build stronger payment networks.
Sentiment
Mostly PositiveNEGATIVENEUTRALPOSITIVE
Publishers
222
Articles
202
Reach
424
A
AnonymousAuthor
