Merchants Face 0.4% Fee On UPI Payment Above ₹2,000, Pg1

Key Highlights:

• The National Payments Corporation of India (NPCI) introduced a 0.4% Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) payments exceeding ₹2,000 for most merchants.
• The new charges are set to take effect from October 15.
• Person-to-person (P2P) transactions and person-to-merchant (P2M) transactions up to ₹2,000 will remain exempt from these charges.
• Certain sectors like Railways, telecom, insurance, fuel, and agriculture inputs will incur a flat MDR of ₹5 for transactions above ₹2,000.
• A dedicated fund will be established using 5% of the total MDR collections to promote UPI usage among small merchants.

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Detailed Insights:

• The Merchant Discount Rate (MDR) will be shared among various payment ecosystem partners, including banks and app providers.
• For individual transactions of ₹75,000 and above, the MDR will be capped at ₹300 per transaction.
• Small merchants receiving up to ₹1 lakh per month via UPI QR codes under the Person-to-Person Merchant (P2PM) classification are exempt from any MDR.
• The Finance Ministry has advised banks to ensure that merchants do not pass on these MDR charges to customers.
• This new framework aims to make UPI self-sustainable and incentivize its expansion into rural and semi-urban areas.
• A reduced MDR of 0.02%, capped at ₹300, applies to payments for mutual funds, securities, and stock brokers to encourage retail participation in formal financial markets.
• Data analysis by the Finance Ministry indicates that only about 4% of merchant transactions are expected to be impacted by the introduction of MDR.

Key Concepts Involved:

• National Payments Corporation of India (NPCI): An umbrella organization for operating retail payments and settlement systems in India.
• Unified Payments Interface (UPI): An instant real-time payment system developed by NPCI facilitating inter-bank peer-to-peer and person-to-merchant transactions.
• Merchant Discount Rate (MDR): A fee paid by a merchant to their bank for accepting payments through digital channels.
• Person-to-Person Merchant (P2PM): A classification for small merchants receiving payments via UPI QR codes, often exempt from MDR up to a certain limit.