NPCI imposes 0.4% merchant discount rate on high-value UPI payments

The National Payments Corporation of India has rolled out a 0.4 per cent merchant discount rate (MDR) on Unified Payments Interface transactions valued above ₹2,000, marking the first levy on the country's fastest-growing digital payment system. The move aims to create a sustainable revenue model for the payments ecosystem while protecting retail consumers and small-scale traders. According to the Ministry of Finance, person-to-person transactions, which remain fully exempt, represent approximately 70 per cent of the total value of UPI transactions currently processed in India. This exemption underscores the government's commitment to keeping peer-to-peer digital payments cost-free for ordinary citizens. The finance ministry further clarified that only about 4 per cent of all merchant-related UPI transactions will be subject to the new charge, suggesting that the measure will have limited impact on broader payment patterns. The threshold of ₹2,000 is intended to shield routine small purchases from the fee while generating revenue from high-value commercial transactions. The introduction of the MDR represents a significant policy shift for UPI, which has grown exponentially since its launch in 2016 to become a cornerstone of India's digital payments infrastructure.