New Delhi: Customers will not be charged the 0.4% Merchant Discount Rate (MDR) on UPI transactions above ₹2,000, official sources said on Thursday. Banks will also conduct awareness campaigns to clear misconceptions surrounding the fee.
Sources said the government would not receive any money from the MDR charged on UPI transactions. The revenue from MDR would go to various participants in the UPI ecosystem, including banks.
Sources also expressed hope that the GST Council would consider whether GST should be levied on MDR applicable to UPI transactions above ₹2,000.
The government has introduced a 0.4% MDR on UPI payments above ₹2,000 made to merchants from October 15. The fee will be capped at ₹300 for payments of ₹75,000 or more. Person-to-person (P2P) transactions and small-value payments have been kept outside the fee structure.
Some experts have expressed concern that imposing MDR on UPI transactions above ₹2,000 could prompt small merchants and price-conscious consumers to return to cash payments. Traders have also objected to the move, saying they could encourage cash payments.
An official source said customers would not be charged the 0.4% MDR and that discussions would be held with the Indian Banks’ Association (IBA) to address misconceptions.
The government will also hold discussions with retail traders’ organisations, including the Confederation of All India Traders (CAIT), to address concerns among small merchants regarding UPI MDR.
The source rejected concerns that the merchant fee on UPI transactions could lead people to return to cash payments.
