UPI Payment: UPI has become the most popular payment method in the country. People use UPI to settle bills everywhere, from tea stalls to showrooms. Its popularity stems from its fast, easy, and low-cost payment system. However, UPI is currently a topic of discussion regarding MDR (Merchant Discount Rate). Merchants are required to pay an MDR of up to 0.4% on payments exceeding ₹2,000. The government implemented this MDR policy starting October 15.
To raise customer awareness, a video has been posted on UPI’s official social media platform, X. The caption reads: “Do you think MDR applies to every UPI transaction? Think again. MDR is zero for all transactions under ₹2,000.” In the video, a shopkeeper repairs a woman’s mobile phone. As she makes the payment, she asks whether the shopkeeper has to pay MDR on the transaction. The shopkeeper explains that there are no charges for UPI payments up to ₹2,000.
What is MDR?
MDR stands for Merchant Discount Rate. It is a fee charged to merchants who accept digital payments from the system providers facilitating the transaction. This fee is applied in accordance with the rules set by payment services, banking systems, and the companies involved. When a payment is made via UPI, the merchant gains the facility to accept the payment; however, for payments exceeding ₹2,000, an MDR charge applies, which the merchant must pay separately.
What is the rule regarding the ₹2,000 limit?
Under this new UPI rule, no MDR (Merchant Discount Rate) charge applies to person-to-person transactions—such as those between friends or family members. However, for payments exceeding ₹2,000 made at shops, restaurants, or business firms, the merchant must pay an MDR of 0.4%. For instance, if you make a payment of ₹2,500, the merchant would incur an MDR charge of ₹10. Similarly, the MDR charge would be ₹20 for a payment of ₹5,000 and ₹40 for a payment of ₹10,000.
Impact on Shopkeepers and Business Owners
If MDR applies to payments for specific categories of merchants, it could impact business costs. Small traders operating on low profit margins, in particular, would have to bear the cost of accepting payments. The implementation of MDR could thus affect small businesses.