UPI MDR will not be passed on to consumers, Sitharaman says

Union Finance Minister Nirmala Sitharaman on Monday said the new Merchant Discount Rate (MDR) on certain UPI transactions will not be passed on to consumers, clarifying that customers will continue to make payments without an additional transaction charge.Speaking in Chandigarh, Sitharaman said MDR does not apply to UPI transactions below ₹2,000 and is neither a tax nor a cess. The money collected through the charge will not go into the government’s Consolidated Fund of India, she said.Instead, MDR is a charge within the payments ecosystem, levied by service providers to support the cost of operating and improving the UPI system, Sitharaman said.Under the new framework announced by the National Payments Corporation of India (NPCI), a 0.4% MDR will apply from October 15 to eligible person-to-merchant UPI transactions above ₹2,000. The charge will be capped at ₹300 for transactions of ₹75,000 and above. UPI payments between individuals and merchant payments up to ₹2,000 will remain outside the MDR framework.MDR is essentially a fee paid by a merchant for processing a digital payment. For example, a ₹10,000 eligible UPI merchant transaction would attract an MDR of ₹40 under the new framework. The fee is charged within the payments chain rather than directly to the person making the payment.Sitharaman also said she had clarified the issue in Parliament when it was raised during the session. She accused the Opposition of spreading misconceptions about the new UPI charges and urged the public to remain vigilant about misinformation.The new MDR framework has nevertheless drawn criticism from some merchant groups. Petrol pump dealers, for instance, have sought an exemption, saying the additional payment-processing cost could weigh on their already regulated margins.

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