UPI MDR Charge: The use of UPI (Unified Payments Interface) for digital payments has increased rapidly in India. From small shops to big businesses, payments are being made through UPI everywhere. But now there is a preparation to implement Merchant Discount Rate i.e. MDR fee on selected UPI merchant transactions.
In view of the festive season, the National Payments Corporation of India (NPCI) had extended the process of implementing this fee from the earlier date of October 15. Now after the end of Diwali festival and before Bhai Dooj on 11th November, businessmen are waiting for clarity regarding its new date.
UPI and Service Steering Committee had decided that this fee will be implemented after Diwali. However, a separate notification is to be issued as to the date from which it will be made effective.
0.4% MDR will be charged on payments above ₹2000
According to the FAQ issued by NPCI, 0.4 percent MDR charge will be applicable on eligible person-to-merchant (P2M) UPI transactions above ₹2000.
This means that if a customer makes an eligible UPI payment of more than ₹2,000 to a shopkeeper or merchant, the transaction will be charged at the prescribed rate. However, this fee will not be charged from the customer but from the merchant receiving the payment. In this, a maximum limit of ₹ 300 has also been fixed on transactions of ₹ 75,000 or more.
How much will be charged on UPI payment of ₹1 lakh?
Let us understand this with an example. Suppose a businessman gets a payment of ₹ 1 lakh through UPI. Calculating it at the normal rate of 0.4 percent, the fee will be ₹ 400.
But the maximum fee for transactions of ₹75,000 or more is fixed at ₹300. In such a situation, on this payment of ₹ 1 lakh, the businessman will have to pay ₹ 300 MDR.
That is, in this example, instead of ₹ 400 which would be calculated as 0.4 percent, due to the maximum limit, ₹ 300 will be charged.
Separate rules on railways, telecom and fuel
For some special business categories, concessional charges have been fixed instead of the normal 0.4 percent MDR rate. These include railways, telecommunication services, insurance and fuel related businesses.
Eligible payments above ₹2,000 in these categories will be subject to a one-time MDR fee of ₹5 per transaction instead of a percentage charge.
This means that the fee calculation for these special categories of merchants will be different from the general merchant category.
How much are the charges on mutual fund and share market payments?
A separate MDR rate has also been set for capital market related transactions. This includes payments made to mutual funds, securities, stock brokers and dealers.
A concessional MDR rate of 0.02 per cent will be applicable on such eligible transactions. However, the maximum fee in this category also will be limited to ₹300.
Will general customers have to pay any additional charges?
The most important thing in this proposed system is that the MDR fee will have to be paid by the merchant i.e. the businessman receiving the money. This will not have any direct impact on customers paying through UPI. However, there is definitely a concern that in some way or the other the burden will fall on the customers only.
Apart from this, person to person (P2P) UPI transfers will remain free as before. That is, the proposed MDR fee will not be applicable on sending money from one person to another person's bank account.
What are businessmen waiting for now?
NPCI had taken forward the process of implementing MDR to avoid additional transaction costs during the festive season. Now businessmen are waiting for the notification of its revised effective date.
At present, information about fee rates and arrangements for different categories is available, but the new effective date is yet to be officially confirmed. Therefore, traders will have to keep an eye on the notification of NPCI for the last date and applicable conditions.