UPI has clarified that Merchant Discount Rate (MDR) does not become a direct charge for people using the platform. Person-to-person payments remain free, and UPI users are not charged MDR when they make payments.
The distinction applies to person-to-merchant transactions. 0 MDR continues for such payments up to ₹2,000. For specified merchant transactions above ₹2,000, MDR may apply on the merchant side.
What the clarification means
MDR is a merchant-side charge. It is therefore separate from a fee charged to the customer making a UPI payment. The clarification confirms that UPI users will not be charged MDR directly.
The treatment depends on the type of transaction:
- Person-to-person payments remain free.
- Person-to-merchant transactions up to ₹2,000 continue with 0 MDR.
- Specified person-to-merchant transactions above ₹2,000 may attract MDR for the merchant.
Why the distinction matters
The same payment platform can be used for transfers between individuals and for purchases from merchants. The MDR rules described by UPI separate these 2 categories rather than applying one charge structure to every UPI transaction.
For users, the key point is that the merchant-side MDR does not turn into a user-side UPI fee. The stated threshold concerns when MDR may apply to specified merchant transactions, while the payment user remains outside that charge.
The UPI graphic accompanying the clarification presents the message as an MDR update and describes the service as “Simple. Secure. For Everyone.” It also depicts a successful payment on a mobile phone.
What remains free
The clarification specifically keeps person-to-person payments free. It also maintains 0 MDR for person-to-merchant payments up to ₹2,000.
For transactions above ₹2,000, the clarification refers to specified merchant transactions rather than all such payments. It does not state a single MDR rate or provide a complete list of the merchant transactions covered by the charge.
Conclusion
UPI users are not charged MDR directly. Person-to-person payments remain free, while 0 MDR continues for person-to-merchant payments up to ₹2,000; specified merchant transactions above that amount may involve a merchant-side MDR.
Frequently Asked Questions
Q. Are UPI users charged MDR?
No. MDR is a merchant-side charge, and UPI users are not charged MDR.
Q. Are person-to-person UPI payments free?
Yes. Person-to-person payments remain free.
Q. Is MDR 0 for merchant payments up to ₹2,000?
0 MDR continues for person-to-merchant transactions up to ₹2,000.
Q. Can merchant transactions above ₹2,000 attract MDR?
Yes. MDR may apply to specified merchant transactions above ₹2,000.
Q. Does MDR apply to every UPI payment above ₹2,000?
The clarification refers to specified merchant transactions above ₹2,000, not every UPI payment above that amount.
Q. Who pays MDR?
MDR is a charge on the merchant side, not a direct charge on the UPI user.
