New UPI framework keeps P2P transactions free; 96 pc merchant payments unaffected
New Delhi, Sept 15 (TNT): The new framework for Unified Payments Interface (UPI) transactions will keep all person-to-person (P2P) payments free, irrespective of the amount transferred, while about 96 per cent of person-to-merchant (P2M) transactions will remain unaffected.
Under the framework, merchant payments up to Rs 2,000 will continue to remain free of Merchant Discount Rate (MDR).
Small merchants receiving up to Rs 1 lakh per month through UPI QR codes under the P2PM category will also continue to enjoy zero MDR.
MDR of 0.4 per cent will apply only to specified merchant transactions above Rs 2,000, with a cap of Rs 300 for transactions of Rs 75,000 and above.
Transactions above Rs 2,000 in essential and thin-margin sectors such as railways, telecommunications, insurance, fuel and agricultural inputs will attract a flat MDR of Rs 5 per transaction.
Payments relating to mutual funds, securities, stockbrokers and dealers will attract an MDR of 0.02 per cent, capped at Rs 300 per transaction.
The framework clarifies that MDR is neither a tax nor a charge collected by the government or NPCI.
It will be distributed among payment ecosystem participants, including banks, payment service providers and UPI application providers.
Customers will not be required to pay MDR. Banks have been advised to ensure that merchants do not pass the charge on to customers, while UPI application providers will not be permitted to impose platform fees or hidden charges.
The framework also provides for a dedicated fund for promoting UPI adoption among small merchants, with an amount equivalent to 5 per cent of total MDR collections to be contributed to the fund.
The framework, introduced under the Payment and Settlement Systems Act, 2007, following deliberations by the UPI Steering Committee, aims to ensure the long-term sustainability of the UPI ecosystem while protecting individuals and small merchants from additional charges.
Daily transaction limits prescribed by banks and NPCI will continue as security and risk-management measures and will not constitute charging thresholds.
TNT KS
