New Delhi, Sept. 14 -- The Centre on Monday opened the way for banks and payment service providers to potentially levy charges on UPI transactions above Rs 2,000, while keeping payments up to that limit and RuPay debit card transactions free. The move follows amendments to the Payment and Settlement Systems Act, passed by Parliament last month, which provide legal backing to modify the existing zero-MDR framework for UPI and RuPay transactions.
In a gazette notification, the Finance Ministry specified RuPay-powered debit cards and UPI transactions of up to Rs 2,000 as electronic modes of payment. It said, "No bank or system provider shall impose, whether directly or indirectly, any charge on a person making or receiving payments through these modes."
This means consumers will not be charged for UPI transactions up to Rs 2,000. Finance Minister Nirmala Sitharaman had also said that UPI would remain free for consumers, stating, "Will consumer pay any UPI charge - No."
The notification, however, leaves scope for charges on transactions above Rs 2,000. The final decision on the threshold and the merchant discount rate (MDR) will rest with the UPI and Services Steering Committee headed by the National Payments Corporation of India (NPCI).
MDR is paid by merchants to banks and payment service providers for processing digital payments. UPI currently carries zero MDR, unlike debit and credit card payments. The government has previously said any MDR on UPI would cover only a limited set of merchant transactions above a specified threshold and would be lower than card charges.
Industry sources expect the eventual MDR to be around 25 to 40 basis points. Person-to-person transactions are expected to remain free.
Published by HT Digital Content Services with permission from Millennium Post.