Government Introduces New UPI Charges: What You Need to Know

New UPI Payment Framework Unveiled

New Delhi: On Tuesday, the government announced a new framework for UPI payments, imposing a 0.4% fee on transactions exceeding Rs 2,000 for merchants, with a maximum charge of Rs 300 for payments of Rs 75,000 or more.

This decision marks the end of the zero-MDR policy that had been in effect since January 2020, which was initially aimed at promoting digital payment usage but faced criticism from banks and fintech companies for being financially unviable.

Key sectors such as railways, telecom, and fuel will incur a fixed fee of Rs 5 per transaction, while capital markets will benefit from a reduced rate of 0.02%.

Small merchants generating up to Rs 1 lakh monthly through UPI QR codes will remain exempt from these charges, a measure the government claims protects 96% of merchant transactions from any new fees.

The Merchant Discount Rate (MDR) for person-to-merchant (P2M) UPI transactions over Rs 2,000 is capped at Rs 300 for payments of Rs 75,000 and above.

Notably, person-to-person transfers, which account for 37% of UPI's transaction volume and 70% of its value, will not be affected by these changes.

Additionally, app providers are prohibited from imposing platform fees, and banks must ensure that merchants do not transfer MDR costs to customers. A portion of the new fee revenue will be allocated to support the expansion of UPI services for small merchants.