The Department of Financial Services issued a notification, bringing into effect changes to the Payment and Settlement Systems Act, exempting UPI transactions below ₹2,000 and debit cards operated through RuPay from any charges imposed by banks.
MDR refers to the fee charged to a merchant by a bank for accepting payments from customers via digital modes like UPI, credit cards, and debit cards. This has been zero for UPI payments since January 2020, when the government amended the rules to make such payments free and drive digital adoption. ET in an exclusive report in its July 16 edition reported the government’s move to bring back MDR on UPI and that the transaction threshold would be set at ₹2,000 for levy of MDR.
The government, subsequently, in the last monsoon session of parliament, amended the Payment and Settlement Systems (PSS) Act, 2007.
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Detailed Directive to Follow
This enabled it to permit banks and other service providers to levy charges on transactions made through UPI and other notified digital payment modes.
A detailed operational directive on the MDR charges is expected to be soon issued by National Payment Corporation of India, people familiar with the matter said. The rates would be decided by the “UPI and services steering committee” headed by National Payment Corporation of India, or NPCI, with other stakeholders.”No bank or system provider shall impose, whether directly or indirectly, any charge upon a person making or receiving a payment by using the electronic modes of payment specified…” the gazette notification stated.
In August, the finance ministry issued a statement saying any future MDR charges on transactions through the UPI, will be nominal and apply only to a limited set of merchant transactions. A vast majority of merchant transactions will not attract any fees, it had said.
According to a latest report by a rating agency, CareEdge peer-to-merchant (P2M) transactions constitute 29% of total UPI transaction value, with 67.2% of P2M transaction value exceeding ₹2,000.