UPI Money-Back Offer Scheme Launches October 15 With Tiered Merchant Charges

The RBI's new Merchant Discount Rate (MDR) structure for UPI payments becomes operational on October 15, marking a significant change to India's digital payment ecosystem. Under the revised framework, charges will apply to merchant transactions based on transaction value and business sector, though consumer-to-consumer transfers remain free of charge.

Transactions valued at Rs 2,000 or below will continue without charges for consumers sending money to merchants. However, payments exceeding this threshold will attract sector-specific rates, with a maximum cap set at Rs 75,000 per transaction. The tiered structure aims to balance merchant participation with consumer affordability in India's rapidly growing digital economy.

Small merchants and traders operating below specified turnover thresholds have been exempted from the new charges, reflecting regulatory concerns about maintaining accessibility for micro and small businesses. Financial institutions will bear responsibility for collecting and remitting these charges, with the framework designed to ensure transparency in the payment process.

The implementation follows regulatory consultations aimed at creating sustainable revenue models for payment system operators while preserving the accessibility that has driven UPI's mass adoption. Sector-specific rates vary to account for different merchant types and transaction patterns across retail, e-commerce, and service industries.

Market observers note the change represents a gradual monetization of UPI infrastructure without disrupting the foundational principle of free peer-to-peer money transfers, which remain exempt from charges under the new framework.