Government Rules Out Rollback of 0.4% MDR on UPI Payments Above ₹2,000

The government has ruled out any rollback of the proposed 0.4% Merchant Discount Rate (MDR) on eligible Unified Payments Interface (UPI) merchant payments above ₹2,000, government sources said on September 16. The new framework is scheduled to take effect from October 15.

The revised system will apply to merchant payments above ₹2,000, while person-to-person transfers and smaller UPI payments will remain outside the MDR charge. The government has also clarified that customers will not be directly charged for making UPI payments.

According to the Finance Ministry, the MDR will be borne within the merchant payment ecosystem rather than being collected as a charge from customers. The ministry said more than 95% of merchant transactions are below the ₹2,000 threshold

Small vendors receiving up to ₹1 lakh per month through UPI QR codes will continue to receive zero-charge treatment, according to the government's clarification. Payments for certain essential services, including train tickets, fuel and telecom services, above ₹2,000 will have a flat ₹5 charge under the framework

The Parliamentary Standing Committee on Finance had previously raised concerns about the sustainability of the zero-MDR model, noting that it puts pressure on government finances and that a viable revenue mechanism would be important for the long-term sustainability of the UPI ecosystem.