- The DFS rejected claims that revised UPI MDR is charged to customers in transactions.
- The disputed screenshot was from the merchant side, not showing customer payment of MDR.
- UPI payments via bank accounts and credit cards linked to UPI are economically different.
The Department of Financial Services (DFS) has rejected a claim that the revised Unified Payments Interface (UPI) Merchant Discount Rate (MDR) is being passed on to customers, saying the screenshot cited in support of the claim appears to have been taken from the merchant side.
The clarification comes after a screenshot of settlement details circulated online, with the user claiming that MDR was being charged on a UPI transaction and ultimately passed on to the customer.
In a post on X, DFS said the screenshot was not evidence of a customer being charged MDR, as it appeared to show details from the merchant side.
"Some facts with respect to the screenshot of settlement details posted above are as follows," DFS said.
"The screenshot appears to be taken from a 'merchant' side and not of a customer making a UPI payment. So, there is no argument of customer paying the MDR," it added.
DFS also highlighted a distinction between UPI payments made directly from bank accounts and transactions made using credit cards linked to UPI.
According to DFS, "UPI payments form bank accounts" and "UPI payments through credit cards" are economically different products.
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The department said the screenshot in question showed the payment method as "RuPay CC – Credit Card", meaning the transaction involved a credit instrument rather than a direct bank-account-to-merchant-account UPI payment.
"Further, RuPay Credit Cards linked to UPI follow the rules applicable to credit card transactions which involve short-term loans funded by issuing banks," DFS said.
The department added that to promote RuPay Credit Card usage on UPI among small merchants, there is zero MDR on transactions of up to Rs 2,000 made at small merchants with annual turnover below Rs 20 lakh.
"Any applicable MDR is borne by the merchant, not the customer," DFS clarified.
New UPI MDR Framework
DFS further stressed that the UPI MDR framework discussed in the recent circular applies specifically to direct user-account-to-merchant-account UPI transactions.
"The same should not be mixed up with transactions where credit instruments are being used as payment mode," the department said.
The clarification is significant as UPI payments made directly from bank accounts and credit-card-linked UPI payments operate under different economic structures and regulatory frameworks.
DFS concluded its post by asking users not to circulate what it described as incorrect information.
"You are kindly requested to not share the incorrect information," it said.
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