NEWS: The National Payments Corporation of India (NPCI) has introduced a 0.4% MDR charge on certain UPI payments received by merchants, effective 15 October.

About the Charge

• MDR → A fee paid by merchants to banks/payment service providers for processing digital payments.
• Applicability → 0.4% on eligible UPI transactions above ₹2,000.
• Exemptions → Person-to-person (P2P) transactions + UPI payments to small vendors + transactions up to ₹2,000.
• Small merchants → Those receiving up to ₹1 lakh per month through UPI QR codes are exempt.
• Special sectors → Railways, telecom, insurance and agricultural inputs may have a flat ₹5 MDR on eligible transactions.
• Cap → MDR is capped at ₹300 per transaction for transactions of ₹75,000 and above.

Key Points

• Fee sharing → The 0.4% charge is shared among banks and other payment ecosystem partners.
• Government’s position → Banks have been advised to ensure the fee is not passed on to customers.
• Significance → The change affects merchant payment costs while retaining exemptions for small vendors and low-value transactions.