The National Payments Corporation of India (NPCI) will introduce a 0.4% merchant discount rate (MDR) on Unified Payments Interface (UPI) transactions exceeding Rs2,000 ($20.8).
The charges will be applied from 15 October.
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The measure follows a legislative amendment passed earlier this week that authorised fees on UPI transactions above the threshold. Customers will not pay the MDR directly, and banks have been advised to ensure that merchants do not pass the charge on to customers.
NPCI said revenue from the levy will support investment in system resilience, technological innovation, cybersecurity, and customer service.
UPI, India’s instant payments system, processed 24 billion transactions worth $311bn in August, according to a Reuters report.
The MDR framework sets different fees and caps by merchant category. Payments to railways, telecommunications, insurance, and fuel merchants will carry a flat MDR of Rs5. For general merchants, fees on transactions above Rs75,000 ($782) will be capped at Rs300.
Capital market transactions, including payments for equities and mutual funds, will carry a 0.02% fee, capped at Rs300.
Small businesses and certain locations will remain exempt. Merchants receiving up to Rs100,000 a month through UPI QR-code payments will not incur MDR charges. QR-code transactions in rural and semi-urban areas will also remain free.
The Reserve Bank of India (RBI), the central bank of the country, also supported the move.
In a post on X, RBI said: “The introduction of MDR on large-value UPI transactions (i.e., above Rs2,000) is an important step towards strengthening the long-term sustainability of India’s digital payments ecosystem. It will help UPI in continuing to scale, innovate and serve consumers and businesses across the country.
“A fair and appropriate distribution of MDR across ecosystem participants will support continued investment in technology, infrastructure and acceptance networks. This, in turn, can enable wider UPI acceptance, deepen the customer base and support sustained growth in transaction volumes.”
