NPCI sets 0.4% MDR on UPI above Rs 2,000, caps fee at Rs 300 for Rs 75,000 and higher transactions

The National Payments Corporation of India (NPCI) has introduced a0.4% Merchant Discount Rate (MDR) on select Person-to-Merchant (P2M) UPI transactions above Rs 2,000. The new framework will take effect fromOctober 15, 2026. For transactions ofRs 75,000 and above, the MDR will be capped at Rs 300 per transaction. This means merchants will not pay more than Rs 300 even if 0.4% of the transaction value exceeds that amount. For example, a Rs 1 lakh transaction would attract Rs 400 at the 0.4% rate, but the MDR payable will be limited to Rs 300. UPI transactions ofup to Rs 2,000 will continue to have zero MDR. According to NPCI's FAQ, such small-value transactions account for more than95% of the total volume of UPI P2M transactions. The charges will apply to merchants andnot consumers. Users will continue to make UPI payments free of charge, while UPI app providers will not be allowed to levy a platform fee or any other charge on UPI payments. Small vendors under thePerson-to-Person Merchant (P2PM)framework will continue to be exempt from MDR. The framework covers small merchants receiving up toRs 1 lakh per month through UPI QR codes directly into their accounts. For select merchant categories such asrailways, telecom services, insurance and fuel, a flat MDR ofRs 5 per transactionwill apply to payments above Rs 2,000 instead of the 0.4% rate. The framework also proposes adedicated fund for small merchantsto support digital payment infrastructure and merchant onboarding in Tier 3 to Tier 6 centres, including the Northeast, Jammu & Kashmir and Ladakh. The detailed framework is to be finalised in consultation with the Reserve Bank of India (RBI) within three months. NPCI said the MDR revenue will be distributed within the UPI ecosystem to supportinfrastructure resilience, innovation, cybersecurity and customer service. The FAQ said UPI's MDR remains lower than traditional card-based payment fees. Standard credit card MDRs typically range from1.5% to 2.5%, while debit card MDRs are capped at up to0.9%. Under the new structure, aRs 3,000 transaction will attract Rs 12 MDR, while a Rs 50,000 transaction will attract Rs 200. Once the transaction value reaches Rs 75,000, the MDR is capped at Rs 300. Bareback Media has recently raised funding from a group of investors. Some of the investors may directly or indirectly be involved in a competing business or might be associated with other companies we might write about. This shall, however, not influence our reporting or coverage in any manner whatsoever. You may find a list of our investorshere.

Original source: Entrackr