UPI MDR Charges: Finance Minister Says Customers Won’t Bear the Burden

UPI MDR Charges: Finance Minister Says Customers Won’t Bear the Burden

UPI MDR Charges: The Finance Minister, Nirmala Sitharaman, has provided an explanation about the government’s stand regarding the introduction of Merchant Discount Rate (MDR) for transactions made using UPI system. As per her explanation, customers making payments using UPI system will not have to pay anything extra towards the newly introduced MDR. These clarifications were sought after several discussions regarding possibility of imposition of some kind of MDR for the transactions made using the UPI system.According to the new guidelines for MDR, it will not apply to eligible Person-to-Merchant (P2M) transactions worth ₹2,000. The Person-to-Person (P2P) UPI transactions will be completely free irrespective of the transaction amount. Transactions made under the zero-MDR policy for small merchants will also be exempted from paying the MDR charges.The government has said that above provisions will ensure that about 96% of the P2M UPI transactions will be unaffected by the new MDR policy. It is important to know for customers who use the UPI system for their daily transactions.

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What Is UPI MDR?

The term MDR stands for “Merchant Discount Rate” and refers to the cost involved in processing specific types of digital transactions. This cost gets shared amongst various entities participating in the transaction process including payment service providers. According to Sitharaman, MDR is neither a tax nor a cess being levied by the government on the citizens

MDR on Payments Above ₹2,000

As per the proposed system, starting from October 15, 2026, a MDR of 0.4% will be levied on certain P2M UPI transactions, which are greater than ₹2,000. In the case of transactions of ₹75,000 and higher, the maximum possible amount of MDR has been fixed as ₹300. There are also some specific flat-rate arrangements for certain types of transactions such as those for fuel purchase and railway tickets. However, the charge is not meant to be charged directly from the customer.

Sitharaman Responds to Opposition Claims

In an interview to ANI from Chandigarh, Sitharaman stated that she has already spoken about this matter in Parliament. She alleged that the Opposition was sowing seeds of misinformation regarding the MDR charges for UPI. This is the political statement of the Finance Minister. She appealed to the public to verify information regarding new UPI charges. For common citizens, the important aspects of this proposed system include that UPI payments up to ₹2,000 would still remain out of MDR and P2P transactions would continue to be free.