- Merchants may pay MDR fee on UPI payments.
- Fee applies beyond a certain transaction limit.
- Customers will not be impacted by new charges.
In a major development, the merchants receiving payments through Unified Payment Interface (UPI) may be required in future to pay a nominal fee to the bank after a certain limit. The expected Merchant Discount Rate (MDR) or fee on UPI and RuPay card payments will, however, not impact the customers.
On Tuesday, the Finance Ministry introduced a bill in the Lok Sabha to amend tax regulations, which proposes amendments to the Payment and Settlement Systems Act 2007. The legislation could pave the way for imposing an MDR.
Currently, under the Payment and Settlement Systems Act of 2007, no bank or other service provider can charge any fee for UPI payments.
According to Finance Ministry sources, cited by Jagran.com, the National Payments Corporation of India (NPCI), the regulatory agency for UPI operations, will issue detailed guidelines in this regard.
MDR on UPI: Free payment limit
The NPCI guidelines will specify the fee and the amount. As per the report, the fee will only apply to UPI payments over Rs 2,000.
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As part of the amendment to tax laws, businesses with a turnover of more than Rs 50 crore will be able to accept payments using BHIM UPI QR codes and RuPay cards. The limit for this payment amount will also be set by NPCI.
MDR charge
The proposed amendment bill does not specify the specifics of the fee. The fee, after proposed legislation comes into effect, could range from 0.2 to 0.3 per cent. This will not impose any additional burden on the average consumer.
When a card payment is made, merchants have to pay a very small portion of the total payment as a fee to the service provider bank or institution. But since 2020, the government has maintained a zero MDR policy and has, in effect, incentivised the transactions.
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If the amendment is passed by Parliament, merchants could be required to pay a fee to banks for payments made through UPI beyond a certain amount.