- Credit card-linked UPI transactions are exempt from the new 0.4% MDR framework
- New MDR rules apply to direct UPI payments over Rs 2,000 starting October 15
- A flat Rs 5 MDR applies to select sectors like railways and fuel on payments above Rs 2,000
Credit card-linked UPI transactions will remain outside the scope of the new 0.4% Merchant Discount Rate (MDR) framework, the government has clarified, providing relief to users who make UPI payments through linked credit products.
The clarification comes ahead of the new UPI fee framework, which will come into effect from October 15. Under the revised rules, MDR will apply to direct account-to-merchant-account UPI transactions above Rs 2,000, with a 0.4% charge for large merchant payments, subject to a cap of Rs 300 per transaction.
Responding to whether the new MDR would apply to transactions made through credit cards linked to UPI or credit lines, the government clarified that such payments operate under separate credit product rules.
Credit-linked UPI payments, including RuPay credit cards linked to UPI and pre-sanctioned bank credit lines, involve short-term loans funded by issuing banks. These transactions therefore continue to follow standard credit card guidelines.
The new MDR framework applies specifically to direct user-account-to-merchant-account UPI transactions and does not cover credit-linked UPI payments.
New UPI Charges From October 15
Under the revised framework, the free UPI window has been narrowed for certain high-value merchant transactions. A flat Rs 5 MDR will apply to select transactions above Rs 2,000, while other P2M UPI transactions above Rs 2,000 will attract an MDR of 0.4%. The 0.4% charge will be capped at Rs 300 per transaction, limiting the impact on high-value payments.
Select categories such as railways, telecom services, insurance and fuel will attract the flat Rs 5 MDR on UPI payments above Rs 2,000.
ALSO READ: New UPI Fee Rules: 0.4% MDR On Payments Over Rs 2,000; Flat Rs 5 Levy For Railway, Fuel Transactions
Capital-market payments, including transactions involving mutual funds, securities, stock brokers and dealers, will attract a lower MDR of 0.02%, with the charge capped at Rs 300 per transaction.
The new framework is expected to have a limited impact on overall UPI usage. Only around 4% of merchant transactions are expected to be affected, while more than 95% of UPI person-to-merchant transactions will remain outside the MDR framework.
Small merchants operating under the P2PM model will continue to enjoy zero MDR. There will also be no monthly quota or cap on free UPI usage for individual users.
The revised MDR structure will also create a dedicated fund to support UPI acceptance among small merchants. Five per cent of total MDR collections will be allocated to the fund to promote UPI adoption among smaller businesses.
The MDR revenue will be shared among UPI ecosystem players and is expected to support expansion, cybersecurity and innovation. The revised UPI charges are also expected to remain lower than those applicable to cards and digital wallets.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.