The government has introduced a new framework for charges on high-value UPI merchant transactions. Under the revised rules, UPI payments made at petrol pumps above ₹2,000 will attract a flat Merchant Discount Rate (MDR) of ₹5 per transaction.
The new framework introduces a standard MDR of 0.4% on eligible UPI merchant payments above ₹2,000. For transactions worth ₹75,000 or more, the MDR will be capped at ₹300.
However, certain sectors, including fuel, railways and telecom, will follow concessional rates. Capital-market transactions will also have a lower MDR of 0.02%.
UPI Payments at Petrol Pumps
Customers making fuel purchases through UPI at petrol stations will attract the flat ₹5 MDR when the transaction value exceeds ₹2,000. According to the National Payments Corporation of India (NPCI), the concessional rate is intended to prevent high processing costs on large fuel payments.
For fuel transactions below ₹2,000, MDR will remain zero. Therefore, routine refuelling payments under this threshold will continue without MDR.
The NPCI has also clarified that petrol pump operators will not have to bear MDR on these transactions.
Insurance Payments Above ₹2,000
Insurance payments will also come under the concessional MDR structure. For insurance premiums above ₹2,000, the applicable MDR will be a flat ₹5 per transaction instead of the standard percentage-based rate.
The revised structure is aimed at keeping digital payment costs lower for high-value insurance collections, particularly annual and half-yearly premium payments.
Most UPI Merchant Payments Remain Unaffected
The Finance Ministry has clarified that there will be no change in charges for person-to-person (P2P) UPI transactions. Users will continue to be able to transfer money to another person through UPI without any charge, irrespective of the amount.
Merchant payments of up to ₹2,000 will also remain outside the MDR framework. Small merchants covered under the zero-MDR system will continue to receive the applicable exemption.
According to the government, around 96% of person-to-merchant UPI transactions will therefore remain unaffected. The new MDR structure will apply only to specified merchant transactions above ₹2,000.
Zero-MDR System Replaced by New Framework
The latest framework replaces the zero-MDR system that has been in place since January 2020. The earlier arrangement was introduced to encourage the adoption of digital payments, but banks and fintech companies had raised concerns about its long-term sustainability.
The new structure introduces different MDR rates depending on the type and value of the merchant transaction, while continuing to keep person-to-person UPI payments free.