Business · India Bureau
Regulator Disputes Claims UPI Merchants Pass MDR Costs to Users
India's financial regulator has rejected assertions that merchant discount rates on UPI transactions are being transferred to customers. The Department of Financial Services clarified the distinction between direct bank account payments and credit card-based UPI transactions.
LSN India ·
The Department of Financial Services (DFS) has pushed back against claims that merchants are passing on merchant discount rate (MDR) charges to users of the Unified Payments Interface platform. The regulatory authority disputed the assertion during recent discussions on UPI transaction costs, maintaining that current practices do not involve such cost transfers to end-users.
The DFS made a significant distinction between two categories of UPI transactions in its response. Payments made directly from bank accounts through UPI operate under one framework, while transactions routed through credit cards linked to UPI accounts follow a different structure. This differentiation is critical to understanding how MDR policies apply across various payment scenarios.
The clarification comes amid ongoing scrutiny of India's digital payments ecosystem and merchant costs. UPI has emerged as a dominant payment method in the country, handling billions of transactions monthly. Regulators have been closely monitoring the mechanism to ensure that fee structures remain transparent and do not place undue burden on either merchants or consumers.
Industry observers suggest the DFS statement indicates the regulator is satisfied with current compliance levels regarding MDR pass-through practices. However, the distinction highlighted by the authority suggests there may be variations in how different transaction types are processed and charged, warranting continued monitoring of the sector.