World · India Bureau
New UPI Framework: Who Pays MDR Charges and Who Doesn't
India's revised UPI payment framework exempts person-to-person transactions from charges while imposing MDR fees only on select merchant transactions above Rs 2,000. The move is expected to benefit the vast majority of small traders and businesses.
LSN India ·
Under the new UPI framework, all peer-to-peer digital transactions will remain completely free for consumers, with no merchant discount rate (MDR) charges applicable to personal money transfers. The Reserve Bank of India's updated guidelines represent a significant shift in how transaction fees are structured across the digital payment ecosystem.
MDR charges, which range from Rs 5 to Rs 300 depending on transaction size, will now apply only to specific merchant transactions exceeding Rs 2,000. This targeted approach aims to reduce the financial burden on India's small business community, which forms the backbone of retail commerce across the country.
Approximately 96 percent of merchant transactions and small retailers will fall outside the MDR framework entirely, according to the new guidelines. This exemption is expected to particularly benefit street vendors, neighborhood shopkeepers, and micro-entrepreneurs who process payments through UPI platforms.
The restructured fee framework reflects policymakers' effort to balance the sustainability of digital payment infrastructure with the need to support small-scale commerce. By concentrating MDR charges on higher-value transactions, the new system aims to encourage broader adoption of UPI while protecting India's informal retail sector from additional costs.