NPCI Framework to Introduce MDR for UPI Payments above Rs 2,000 Starting October 15

The National Payments Corporation of India (NPCI) has announced plans to introduce a Merchant Discount Rate (MDR) for UPI payments above Rs 2,000, effective October 15. Under the new framework, regular merchant UPI transactions will be subject to a 0.4% MDR, with charges capped at Rs 300 for larger transactions.

According to NPCI reports, large merchants will face a 0.4% MDR on UPI payments above Rs 2,000. However, the corporation does not currently plan to implement daily limits on repeated UPI payments made to the same merchant.

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Industry insiders suggest that merchants can avoid the MDR charge by splitting larger payments into multiple transactions of Rs 2,000 or less. This loophole could significantly impact collections under the new system.

The NPCI framework will impose a 0.4% MDR on regular merchant UPI transactions above Rs 2,000. With charges capped at Rs 300 for transactions of Rs 75,000 or more. Merchants in certain categories, such as railways and telecom services, are eligible for concessional rates.

Industry executives believe that merchants may explore workarounds to minimize MDR charges. For example, they could distribute their receipts across different bank accounts or QR codes, keeping each transaction below the prescribed threshold. However, such strategies would effectively present commercial receipts as personal transfers.

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Banks or payment providers might subsequently reclassify these accounts. And businesses could potentially benefit from being incorrectly assigned to a merchant category that attracts a flat Rs 5 charge instead of the 0.4% rate.

People familiar with the matter indicate that NPCI expects some merchants to examine these workarounds once the new framework comes into effect. Nevertheless, the corporation does not currently believe additional transaction-level limits are necessary.