The Indian government has announced a new Merchant Discount Rate (MDR) for certain UPI payments made to merchants. According to the announcement, a 0.4% MDR will apply from October 15 to person-to-merchant (P2M) UPI transactions above ₹2,000.
The decision was announced on September 15 following discussions by the UPI Steering Committee. The measure has been introduced under the Payment and Settlement Systems Act, 2007.
Under the new system, the MDR will be calculated based on the total value of an eligible transaction. For example, if a customer makes a UPI payment of ₹3,000 to a merchant, the MDR at 0.4% would be ₹12.
There will also be a maximum limit on the MDR for larger transactions. For transactions above ₹75,000, the MDR will be capped at ₹300. This means the charge will not continue increasing beyond ₹300, even when the transaction value is much higher.
For example, a ₹50,000 transaction would attract an MDR of ₹200 at the 0.4% rate. A ₹75,000 transaction would result in ₹300. For transactions above ₹75,000, the maximum MDR would remain ₹300.
The new rule specifically concerns consumer-to-merchant payments, rather than person-to-person transfers. The change is expected to affect merchants and businesses that regularly receive higher-value UPI payments.
The introduction of the MDR marks a change in the way certain high-value UPI merchant transactions are handled. Merchants and payment service providers will need to take the new rate and maximum cap into account from October 15.