GUWAHATI: The Merchant Discount Rate (MDR) on select UPI payments above ₹2,000 will not be passed on to consumers, Union Finance Minister Nirmala Sitharaman said on Friday, September 25, amid concerns over the impact of the revised charges.
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Sitharaman said the additional cost would have to be borne by merchants and other participants in the payments ecosystem, and consumers should not see the charge added to their bills.
She also clarified that MDR is not a tax, cess or surcharge imposed by the government. According to her, the charge is levied within the payments ecosystem by entities including the National Payments Corporation of India (NPCI), payment aggregators, service providers, providers of point-of-sale machines and merchant banks.
The clarification comes days after NPCI introduced a revised MDR framework for certain person-to-merchant (P2M) UPI transactions above ₹2,000. The revised charges are scheduled to take effect from October 15, 2026.
Under the new framework, a 0.4 per cent MDR will apply to specified merchant UPI transactions above ₹2,000. The fee will be distributed among participants involved in processing the payment, including banks, payment service providers and UPI application providers.
For transactions of ₹75,000 and above, the MDR will be capped at ₹300 per transaction under the standard framework.
MDR refers to the fee associated with processing digital payments. It is generally applicable to merchant transactions and is shared among the different entities involved in processing the payment.
Sitharaman said she had issued a similar clarification earlier when the issue was raised during Parliament.
Meanwhile, the Finance Ministry is also working to ensure that the charges are not passed on to consumers. According to reports, the ministry will engage with the Indian Banks’ Association (IBA) and traders’ organisations to address concerns surrounding the revised MDR framework.
The development comes as the UPI ecosystem prepares for the implementation of the revised charges from October 15.