UPI MDR Charges: Nirmala Sitharaman Clarifies Who Will Pay Under New Framework
Union Finance Minister Nirmala Sitharaman has clarified that UPI users will not be charged an additional fee because of the new Merchant Discount Rate (MDR) framework. Speaking to ANI on Monday, she said the MDR applies within the payment ecosystem and is not a cost that will be passed on to consumers.
The clarification comes amid questions and public discussion surrounding the new UPI MDR rules introduced in September. The government has stated that UPI will continue to remain free for person-to-person payments, while payments to merchants up to Rs 2,000 will also remain free. Around 96% of P2M transactions are expected to remain unaffected.
What Nirmala Sitharaman Said on UPI MDRSitharaman explained that MDR is a fee within the payment ecosystem intended to support the functioning and improvement of payment services. She stressed that it is not a tax or cess collected by the government.
According to the Finance Minister, transactions below Rs 2,000 will not attract MDR under the new framework. She also said the amount involved in MDR would not go to the Consolidated Fund of India and that the charge would operate between participants in the payment ecosystem rather than being imposed directly on customers.
Sitharaman also referred to her earlier clarification in Parliament and alleged that opposition parties were creating confusion by spreading misinformation about the new arrangement. She urged people to remain cautious about claims regarding UPI charges.
What Is the New UPI MDR Framework?The new framework was introduced on September 15 following the government’s notification and the subsequent detailed circular issued by the National Payments Corporation of India (NPCI). Under the framework, a 0.4% MDR applies to specified Person-to-Merchant (P2M) UPI transactions above Rs 2,000.
The MDR is distributed among participants in the digital payments ecosystem, including banks and payment application providers. It is not described by the government as a tax collected by the government or NPCI.
The government has also clarified that UPI payments between individuals will remain free regardless of the amount involved. Payments to merchants of up to Rs 2,000 will also continue without MDR. As a result, approximately 96% of P2M transactions will remain unaffected by the new framework.
MDR Capped at Rs 300 for Large Merchant PaymentsFor eligible P2M transactions above Rs 2,000, the MDR rate has been set at 0.4%. The charge is capped at Rs 300 for transactions of Rs 75,000 and above.
The framework is designed so that the MDR is shared among participants involved in processing UPI payments rather than being directly collected from the person making the payment.
Sitharaman also commented on the controversy surrounding a mimicry incident at Rahul Gandhi’s ‘Chhatron Ki Goonj’ event in Indore. She said that the behaviour was disrespectful to the constitutional position of the Leader of the Opposition and argued that Rahul Gandhi should not have encouraged such conduct.
She added that while freedom of expression is an important part of democracy, she considered the particular form of mimicry to be inappropriate.
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