NPCI introduces 0.4% MDR charge on UPI payments above ₹2,000, exempts small merchants, person-to-person transfers - The Hindu

**NPCI Announces 0.4 % MDR on UPI Merchant Payments Exceeding ₹2,000**

The National Payments Corporation of India (NPCI) has confirmed that, from 1 October 2024, a merchant discount rate (MDR) of 0.4 % will be levied on Unified Payments Interface (UPI) transactions whose value exceeds ₹2,000. The fee, capped at a maximum of ₹300 per transaction, will be borne by the merchant and will not be passed on to the consumer. Person‑to‑person (P2P) transfers and payments under the ₹2,000 threshold will remain free of charge for both users and merchants. Small merchants—defined as those whose annual turnover is below ₹5 crore—are exempt from the new MDR, a concession aimed at protecting low‑volume businesses from additional cost pressures.

The move is part of a broader effort by the payments ecosystem to address the growing volume of high‑value UPI transactions, which now account for a sizable share of digital payments in India. NPCI officials say the 0.4 % rate aligns UPI with other card‑based payment networks, helping to fund ongoing infrastructure upgrades, fraud‑prevention mechanisms, and the expansion of value‑added services. The Reserve Bank of India (RBI) has signalled its support for the measure, emphasizing that consumer protection remains a priority and that the fee structure will be regularly reviewed to ensure market fairness.

Industry reactions have been mixed. Large retailers and e‑commerce platforms have largely welcomed the clarity, noting that the capped fee provides predictability for pricing strategies. Conversely, trade bodies representing micro‑ and small‑scale merchants have expressed concerns that even a modest MDR could erode thin margins, urging the government to consider a tiered exemption or a lower ceiling. The NPCI has pledged to monitor the impact closely and to engage with stakeholders for possible adjustments in subsequent quarters.