New Delhi: Union Finance Minister Nirmala Sitharaman has clarified that consumers will not have to bear the newly introduced Merchant Discount Rate (MDR) on eligible UPI transactions, amid confusion over reports of charges being imposed on users.
Nirmala Sitharaman Clarifies UPI MDR Charges
Sitharaman said the MDR is a fee applicable within the digital payments ecosystem and will not be passed on to customers. She also stressed that the charge is neither a tax nor a cess, and the money collected will not be deposited into the Consolidated Fund of India.
According to the Finance Minister, the responsibility for paying the MDR does not fall on UPI users.
She also accused the Opposition of spreading misleading information about the new framework and urged the public to verify information before drawing conclusions about UPI charges.
When Will MDR Apply On UPI Transactions?
The clarification comes after the National Payments Corporation of India (NPCI) introduced a new MDR framework from September 15.
Under the framework, a 0.4% MDR applies to eligible Person-to-Merchant (P2M) UPI transactions above Rs 2,000, subject to a maximum charge of Rs 300 per transaction.
However, the introduction of MDR does not mean customers will start paying a transaction fee while making UPI payments.
The government has also said that around 96% of P2M UPI transactions will remain unaffected under the new framework.
How Will The UPI MDR Be Distributed?
The MDR is designed as a fee between participants in the payments ecosystem. Banks, payment service providers and other participating entities will share the applicable charge.
Sitharaman said the purpose of the fee is to support the payment infrastructure and improve the services provided through the digital payments network.
She reiterated that the charge should not be confused with a government levy on UPI users.
UPI Users Will Continue To Make Payments Without Charges
The Finance Minister’s clarification is aimed at addressing concerns that UPI users would have to pay extra for transactions following the MDR rollout.
For consumers, UPI payments will continue to be available without a direct transaction charge under the framework outlined by the government.
The clarification also comes amid the rapid expansion of digital payments in India, where UPI has become a major mode of everyday transactions.
