Starting October 15, India’s payments backbone will introduce a 0.4 percent Merchant Discount Rate on person-to-merchant UPI transfers above Rs 2,000, ending nearly six years of zero MDR for UPI and RuPay debit merchant payments. The fee is paid by the merchant to the acquiring bank and ecosystem partners, and is capped at Rs 300 for payments reaching Rs 75,000. Officials stated that only about 4 percent of merchant transactions will meet the new charge, while person-to-person transfers and merchant payments of Rs 2,000 or less remain entirely free.
Street vendors and small sellers taking up to Rs 1 lakh a month on QR codes straight into bank accounts are fully exempt, though three straight months above that threshold moves them into the charged category. Certain sectors such as railways, telecom, insurance, fuel, agricultural inputs, and some utilities will pay a flat Rs 5 above Rs 2,000, while mutual-fund and securities payments attract 0.02 percent, capped at Rs 300. Additionally, the Finance Ministry noted that customers must not be charged a separate UPI surcharge, and UPI apps are barred from adding platform fees.
The central bank called the shift necessary for long-term sustainability due to surging UPI value and annual industry costs for rails, fraud controls, and bandwidth estimated near Rs 20,000 crore. A dedicated fund seeded with 5 percent of MDR collections will support rural and small-merchant acceptance. Meanwhile, the political response varied, with Congress labeling the levy a “Modi tax” and the BJP calling the charge a scare story while emphasizing that consumers pay nothing.