UPI’s new fee structure aims to support small merchants, ministry asserts

NEW DELHI, September 16 – The Finance Ministry clarified on Wednesday that the recently announced Merchant Discount Rate (MDR) for the Unified Payments Interface (UPI) is a domestically conceived measure, not the result of any foreign meddling.

Since its launch in 2016, UPI has evolved into the world’s most extensive real‑time interoperable payment platform, built entirely on Indian specifications. The ministry reiterated that every policy step concerning UPI, including the MDR, is taken independently by Indian authorities.

According to official data, UPI facilitated 24.5 billion transactions in August alone. To keep the ecosystem self‑sustaining, a minimal charge will be levied on high‑value merchant transactions. The proceeds are earmarked for upgrading infrastructure, enhancing cyber‑security, and extending financial support to small traders in tier‑3, tier‑4 cities and rural locations.

“The new framework ensures that the funds collected from larger merchant transactions are reinvested to strengthen digital payments nationwide and to aid small businesses,” the ministry said.

UPI will remain free for end‑users. Sending money to a contact, paying at a shop or scanning a QR code will not attract any fee.

For merchants, a 0.4 percent fee will apply only on transactions above ₹2,000 – a rate far lower than that of credit‑card networks.

Specific categories such as railway tickets, fuel, telecom services, bill payments and insurance will face a flat ₹5 charge for transactions over ₹2,000, while mutual fund and securities settlements will be levied at 0.02 percent, with a maximum of ₹300.

The ministry warned that merchants cannot shift the MDR cost to customers, and UPI apps are prohibited from adding any platform‑level surcharges.