NEW DELHI. Union Finance Minister Nirmala Sitharaman has clarified that eligible UPI users will not be charged Merchant Discount Rate (MDR) on their transactions. She said MDR is a charge within the digital payments ecosystem and is neither a tax nor a cess. The government has directed that the charge should be absorbed within the ecosystem rather than passed on to customers.
Under the revised framework, a 0.4% MDR will apply to specified Person-to-Merchant (P2M) UPI transactions above ₹2,000, subject to a cap of ₹300 for transactions of ₹75,000 and above. The government said around 96% of P2M UPI transactions will remain unaffected, while Person-to-Person (P2P) transactions will continue to be free. MDR will be distributed among participants such as banks, payment service providers and UPI app providers.
