Delhi/Hyderabad, Sept. 25: Finance Minister Nirmala Sitharaman said the proposed UPI Merchant Discount Rate is neither a tax nor a surcharge.
She said the MDR will remain within the digital payments ecosystem and will not go to the government.
Sitharaman said the charge will be paid by merchants to entities involved in processing UPI transactions.
These include payment service providers, merchant banks and other participants in the payment ecosystem.
Nirmala Sitharaman | UPI MDR to Apply to Select High Value Payments
The National Payments Corporation of India has introduced a 0.4 percent MDR on specified person to merchant UPI transactions above Rs 2,000.
The new framework will take effect from October 15.
Transactions up to Rs 2,000 and person to person payments will remain free. About 96 percent of merchant UPI transactions are expected to remain unaffected.
For transactions worth Rs 75,000 or more, the MDR will be capped at Rs 300 per transaction.
Sitharaman said the MDR will be distributed among participants in the payment ecosystem.
According to the framework, banks, payment service providers and UPI application providers will receive shares of the MDR.
The Finance Minister said the mechanism would support the technology infrastructure and continued development of digital payments.
She also said the MDR would not be passed on to consumers.
The government has maintained that the framework is intended to support the long term sustainability and expansion of UPI.
Essential sectors such as railways, telecommunications, insurance, fuel and agricultural inputs will attract a flat Rs 5 MDR on eligible transactions above Rs 2,000.
Capital market transactions will attract an MDR of 0.02 percent, capped at Rs 300 per transaction.
Small merchants receiving up to Rs 1 lakh a month through UPI QR payments will remain covered by the zero MDR framework.
Sitharaman also pointed out that merchants already pay MDR on credit and debit card transactions.
The proposed UPI framework has drawn criticism from Opposition parties and concerns over its possible impact on merchants.
The Finance Ministry has rejected claims that the MDR amounts to a government charge.
It has said the collections will be distributed among payment ecosystem participants rather than being credited to the government.
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