NPCI Announces 0.4% MDR on UPI Transactions Above Rs 2,000, With Flat Fee of Rs 5 for Utility Payments

The National Payments Corporation of India (NPCI) has confirmed a new merchant discount rate (MDR) structure for Unified Payments Interface (UPI) transactions, effective from October 15. The new MDR will apply to UPI transactions above Rs 2,000, subject to an overall cap of Rs 300.

For utility payments, fuel purchases, insurance premiums, rail tickets, and several government services, a flat charge of Rs 5 will be applied. Larger retailers, online platforms, and restaurants may choose to absorb the cost of MDR charges. Cash transactions also involve expenses, with several banks charging fees for cash deposits.

The new MDR structure is designed to prevent transaction costs from rising in critical public services and utility bill collection. It aims to keep essential consumer services digitally efficient and low-cost. Here are the key details:.

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"Banks have been advised to ensure merchants do not pass MDR charges on to customers. UPI application providers are expressly prohibited from imposing platform fees or hidden charges," the finance ministry said in a statement.

Here's a breakdown of what transactions will be subject to what charge:.

Capital Market transactions made through UPI will attract an MDR of 0.02% of the transaction value. Subject to a maximum charge of Rs 300. Insurance premiums paid through UPI will be covered under a concessional flat-rate structure.

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Fuel purchased at petrol pumps will attract a flat MDR of Rs 5.

Recurring auto-debit payments, such as utility bills and OTT subscriptions, will not attract the prescribed MDR transaction charges. Educational fee payments, such as school tuition and university term fees, will benefit from flat-fee structures or capped processing rates.

The new MDR structure will take effect from October 15. Banks have been advised to ensure merchants do not pass MDR charges on to customers. UPI application providers are expressly prohibited from imposing platform fees or hidden charges.