UPI MDR charges on selected transactions above ₹2,000 are scheduled to take effect from 15 October, while Finance Minister Nirmala Sitharaman has said the measure will not apply to smaller transactions or be imposed directly on consumers.
According to a report by Aaj Tak Business, the Merchant Discount Rate has been set at 0.4% for certain UPI payments above ₹2,000. Sitharaman said the charge is neither a tax nor a cess and that the money will not be deposited in the Consolidated Fund of India. Instead, it will be a charge among service providers intended to support the payment system and maintain service quality.
The Finance Minister made the clarification in an interview and in remarks reported from Chandigarh on 21 September. She said transactions below ₹2,000 would remain outside the MDR framework and maintained that the cost would not be passed on to consumers.
The announcement has nevertheless created uncertainty among merchants. Aaj Tak Business reported that concerns about lower margins have emerged among shopkeepers and traders. An India Today ground report cited in the report also found confusion at some petrol pumps, where customers were reportedly being encouraged to pay in cash instead of using UPI. The direct effect on customers will become clearer after the charges take effect.
The reported MDR structure is not uniform across all categories of payment. The flat-rate model includes petrol pump transactions, for which a fixed MDR of ₹5 has been specified. Merchants handling payments up to ₹1 lakh have reportedly been placed in a zero-MDR category, providing relief to smaller businesses within the stated framework.
The policy also includes separate provisions for capital-market payments. According to the report, UPI payments linked to mutual funds, stockbrokers and other share-market services will attract an MDR of 0.02% from 15 October, with a maximum charge of ₹300 per transaction. On a ₹1 lakh investment, this would amount to ₹20.
Anushka Soham Bathwal, founder and chief executive of Dhanvesttor, said person-to-person UPI transfers would remain free and that ordinary merchant payments up to ₹2,000 would not attract MDR. She also said recurring systematic investment plan payments made through UPI AutoPay or mandates would remain free, while one-time investments would attract the stated 0.02% charge.
Bathwal said the charge for one-time capital-market payments would be borne by the merchant or platform, such as a brokerage application or asset management company, rather than the customer. The implementation of the MDR framework from 15 October will determine how service providers, merchants and payment platforms apply these categories in practice.
