Government has clarified that there will be no charges at all for person-to-person (P2P) UPI transactions, irrespective of the amount transferred.
Finance Ministry said that payments to merchants up to two thousand rupees, along with transactions covered under the zero Merchant Discount Rate (MDR) framework for small merchants, will also remain free.
The Ministry said that consequently, approximately 96 percent of all P2M transactions will remain unaffected. It said that MDR will apply only to specified merchant transactions above two thousand rupees.
The Ministry said that MDR is neither a tax nor a charge collected by the government or the National Payments Corporation of India (NPCI). It is distributed among payment ecosystem participants, including banks and payment application providers, to support the operation and continued expansion of the UPI ecosystem.
NPCI has said that a revised UPI Merchant Discount Rate framework has been introduced on select merchant transactions, effective from 15th of next month, while keeping UPI free for consumers.
Akashavni correspondent reports said that a dedicated fund for promoting use of UPI by small merchants will be set up with a contribution of 5 percent of total MDR collections.
The Finance Ministry said that charges will apply only to person-to-merchant (P2M) transactions exceeding two thousand rupees. It said that UPI app providers are explicitly prohibited from levying platform fees or hidden charges.
The Ministry said that banks have been advised to ensure that merchants do not pass Merchant Discount Rate (MDR) charges to customers for UPI payments.
A nominal MDR of 0.4 percent will be levied on person-to-merchant transactions above 2,000 rupees, while for high-value transactions of 75 thousand rupees and above, MDR will be capped at three hundred rupees per transaction.
The Ministry informed that small merchants receiving up to one lakh rupees per month via UPI QR codes under the Person to Person Merchant (P2PM) classification will continue to enjoy mandatory zero MDR for all transactions.
Additionally, Railways, telecom, insurance, fuel sectors, agriculture inputs will pay a flat MDR of five rupees per transaction above two thousand rupees. It said there are no monthly quotas, volume limits, or tiered caps on free UPI transactions for individuals.
The Ministry said that the MDR framework has been introduced under the Payment and Settlement Systems Act, 2007, following detailed deliberations by the UPI Steering Committee on the applicable rates, operational arrangements and consumer safeguards.
The framework seeks to strengthen the long-term sustainability of UPI while keeping payments free for individuals and protecting small merchants.
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