NEW DELHI:
The Centre has rejected allegations that the decision to introduce a Merchant Discount Rate (MDR) on certain high-value UPI transactions was taken under pressure from foreign governments or payment companies.
The Finance Ministry’s Department of Financial Services said the allegation of external influence was false and misleading, maintaining that India’s UPI policy was framed independently with the objective of developing a sustainable digital payments ecosystem.
Under the new framework, an MDR of 0.4 per cent will apply from October 15 to certain person-to-merchant UPI transactions above Rs 2,000. The charge will be paid by merchants and not directly by consumers. The MDR will be capped at Rs 300 for transactions of Rs 75,000 or more.
Person-to-person transactions will remain outside the MDR framework. The government has also said that most everyday merchant transactions will remain free, with small merchants and certain rural and semi-urban transactions receiving exemptions.
The government said the decision was also aimed at creating a sustainable revenue model for smaller payment applications. The 30 per cent market-share cap for third-party UPI applications, introduced by NPCI in 2020, could not be fully enforced because smaller players lacked a sustainable revenue model, officials said.
The clarification came amid allegations linking the UPI decision to concerns raised by the US Trade Representative over India’s digital payments policies. The government said it had not accepted demands that would give foreign credit-card networks the same position as RuPay on UPI.
The Department of Financial Services pointed to an NPCI circular issued on September 15, under which credit-card transactions on UPI continue to be permitted only through RuPay credit cards. The government said this reflected its policy of promoting RuPay as a domestic alternative to international card networks.
Different MDR rates will apply to specific sectors. Fuel, insurance, railways, telecom and utility payments above Rs 2,000 will attract a flat Rs 5 charge, while transactions involving mutual funds, securities and stockbrokers will attract an MDR of 0.02 per cent, subject to a cap.
The government has maintained that consumers will not be charged a separate UPI fee and that merchants cannot directly impose a surcharge on customers on account of the MDR.
The new framework is scheduled to come into effect on October 15. The government has said it will monitor the rollout and ensure that the charges are not passed on directly to consumers.