The Finance Ministry today clarified that there will be no charges at all for person-to-person (P2P) UPI transactions irrespective of transaction value. The Ministry said that charges will apply only to person to merchant (P2M) transactions exceeding two thousand rupees. It said that UPI app providers are explicitly prohibited from levying platform fees or hidden charges. The Ministry said that banks have been advised to ensure that merchants do not pass Merchant Discount Rate (MDR) charges to customers for UPI payments. A nominal MDR of 0.4 percent will be levied on Person to Merchant transactions above two thousand rupees while for high-value transactions of 75 thousand rupees and above, MDR will be capped at three hundered rupees per transaction. The Ministry informed that Small merchants receiving up to one lakh per month via UPI QR codes under the Person to Person Merchant (P2PM) classification will continue to enjoy mandatory zero MDR for all transactions. Additionaly, Railways, telecom, insurance, fuel sectors, agriculture inputs will pay a flat MDR of five rupees per transaction above two thousand rupees. It said There are no monthly quotas, volume limits, or tiered caps on free UPI transactions for individuals.
The Government has amended the Payment and Settlement Systems (PSS) Act, 2007 empowering the government to notify specific electronic payment modes where no charges shall apply. It issued a notification under this framework, specifying that Unified Payments Interface (UPI) transactions up to two thousand rupees will attract zero Merchant Discount Rate (MDR).
The new MDR framework will make UPI self-sustainable, give incentives for further expansion in rural and semi urban areas and maintain competitiveness, while ensuring that large majority of payments remain free of charge.
