The government has introduced a new system for large digital transactions with sellers by setting a commission of 0.4% on UPI payments exceeding 2000 rupees. Furthermore, the maximum collection amount is capped at 300 rupees for transactions valued at 75,000 rupees and above.
This step concludes the zero Merchant Discount Rate (zero-MDR) regime that had been in effect since January 2020. This regime was introduced to stimulate the use of digital payments but was long criticized by banks and fintech companies as unsustainable.
For vital sectors such as railway transport, telecommunications, and fuel stations, a fixed fee of 5 rupees per transaction has been established. Meanwhile, capital markets have received a lower rate of 0.02%.
Small sellers whose monthly income through UPI QR codes does not exceed 1 lakh rupees remain completely exempt from the new charges. As stated in the official announcement, this exemption protects 96% of all seller transactions from any new fees.
The MDR commission for person-to-merchant transactions via UPI exceeding 2000 rupees is capped at 300 rupees for payments of 75,000 rupees and above. Transfers between individuals—which account for 37% of volume and 70% of UPI value—remain unchanged.
Application developers are prohibited from adding platform fees, and banks have been instructed not to pass MDR costs onto seller customers. One-fifth of the total pool of new commissions will be directed towards expanding UPI usage among small sellers.