UPI Payments Update: Nowadays, most people in the country use UPI for transactions and payments—whether at grocery stores, medical shops, hotels, petrol pumps, or showrooms—by simply scanning a QR code with their mobile phones. UPI has made sending money and making payments incredibly easy. A new development regarding UPI has now emerged: the government has proposed amendments to the Payment and Settlement Systems Act, 2007.
If this proposal is implemented, merchants might have to pay a nominal fee to banks or payment service providers for accepting UPI payments exceeding a certain limit in the future. Crucially, this will not affect the general public. This means that if you purchase goods worth ₹3,000 at a shop using UPI, you will pay only ₹3,000; no extra charges will be levied.
What is the full story?
The government has introduced a bill in the Lok Sabha proposing changes to certain tax-related laws. This bill includes an amendment to the Payment and Settlement Systems Act, 2007. Currently, no Merchant Discount Rate (MDR) is charged on payments made via UPI and RuPay cards, meaning banks or payment companies do not levy any fees on merchants. However, if this law comes into effect, merchants could be charged a nominal fee in certain instances.
Will customers have to pay more?
According to government information, this fee will apply only to merchants. For instance, if you buy goods worth ₹3,000 from a shop, you will only pay ₹3,000; the shopkeeper cannot charge you any additional fee. Therefore, the general public need not worry.
When will merchants have to pay the fee?
According to available information, the NPCI (National Payments Corporation of India) will issue detailed rules regarding this, specifying the transaction amount above which the fee will apply. What will the charges be? Which merchants will this rule apply to? What types of transactions will incur a fee? There is speculation that this rule might apply to UPI payments exceeding ₹2,000, though there has been no official confirmation yet.
What could the charges be?
It is worth noting that the government has not yet finalised any rates. According to sources, the fee could range from approximately 0.2% to 0.3%. For instance, if a merchant receives a UPI payment of ₹10,000 and the fee is set at 0.2%, they might have to pay around ₹20 to the bank or payment service provider. The common consumer will not bear this cost; the merchant will have to pay it.
What is MDR?
MDR stands for Merchant Discount Rate; it is a small fee that a merchant pays to a bank or payment service provider in exchange for accepting digital payments. When a customer pays using a debit or credit card, merchants often already pay such a fee. A similar system could now be implemented for certain UPI transactions as well.
What is the current rule?
Under current regulations, no MDR is charged on UPI payments. Customers are not charged any fees, and merchants do not pay MDR on standard UPI payments either. Consequently, UPI remains a completely free and convenient payment system.
New rules for large businesses too
According to the proposed changes, merchants with an annual turnover exceeding ₹50 crore will also be able to accept payments via BHIM UPI QR codes and RuPay cards. This could make digital payments even easier for large businesses.
Who will formulate the rules?
The rules for this entire system will be determined by the NPCI. The NPCI will specify the transaction amounts that will incur fees, determine which merchants the rule applies to, and decide when it will take effect. A final decision on these matters is yet to be taken.
Card payments already attract charges
When you make a payment using a debit or credit card, the merchant often pays a small fee to the bank. In other words, the MDR (Merchant Discount Rate) is not a new concept; the only difference is that UPI payments have not attracted such charges until now.
How will this affect small shopkeepers?
It remains unclear whether this rule will apply to all merchants or only to large businesses. If a threshold is set, small shopkeepers might get some relief. Definitive information on this will only be available once the NPCI issues its guidelines.
What does this mean for the average customer?
Even if this new rule is implemented, you will still be able to make UPI payments just as before. You will continue to be able to send money by scanning QR codes, and mobile apps will function exactly as they do now. You will not incur any extra charges, and there will be no major changes to the payment process for customers.
Conclusion
It is worth noting that the new change regarding UPI aims to establish a legal framework for charging MDR to merchants under specific circumstances. However, this is merely a proposal, and no final rule has been implemented yet. The best part is that ordinary customers will not have to pay any extra charges; they will continue to make payments via UPI just as easily as before. Even if any charges are introduced in the future, they will apply to merchants, and full details will only be revealed once the NPCI issues official guidelines. Therefore, there is no need for concern.