NPCI Sets 0.4 Percent MDR on Eligible High-Value Merchant UPI Transfers, Caps Fee at Rs 300 While Everyday Usage Stays Free NPCI has rolled out a 0.4 percent Merchant Discount Rate framework for eligible person-to-merchant UPI payments over Rs 2,000, while preserving zero charges for small retail purchases and peer-to-peer transfers. India's digital payment ecosystem is witnessing an adjustment in how commercial transactions are processed, as the National Payments Corporation of India (NPCI) brings in a 0.4 percent Merchant Discount Rate (MDR) on eligible person-to-merchant UPI transactions exceeding Rs 2,000. The newly framed guidelines specifically target qualifying merchant payments while ensuring that everyday small purchases and direct peer-to-peer money transfers remain completely free from levies. Zero Burden on Everyday Consumer Usage The implementation of this updated pricing model does not require retail customers to pay an additional fee each time they scan a code or complete a purchase. MDR functions strictly as an operational charge within the backend of the digital payments network. Whenever a payment is authorized, banks, payment applications, and technology switches collaborate to execute the settlement. The MDR collected is shared among these ecosystem participants to cover underlying infrastructure and processing expenditures. This structure follows a central government notification dated September 14, which confirmed that person-to-merchant UPI payments valued up to Rs 2,000 would continue to operate under a zero-MDR mandate. For qualifying payments going past this threshold, the 0.4 percent rate becomes applicable. For instance, if an eligible merchant transaction amounts to Rs 5,000, the calculated MDR works out to Rs 20. This sum represents an internal settlement cost inside the merchant channel and is not added as a mandatory surcharge onto the shopper's bill. Ceiling Cap of Rs 300 for Substantial Payments To prevent processing expenses from multiplying endlessly on large ticket sizes, the regulatory framework institutes a clear ceiling. For commercial payments reaching or exceeding Rs 75,000, the applicable MDR is capped at Rs 300 per individual transaction. This upper threshold ensures that higher transaction amounts do not accumulate open-ended merchant expenses. Simultaneously, preserving the zero-MDR policy for transactions up to Rs 2,000 protects daily personal spending. Common household purchases, such as grocery runs, dining out, local transit fares, pharmaceutical supplies, and routine bills, remain completely unaffected by the fee. Government estimates project that this updated regime will touch only around 4 percent of all merchant transactions, given that the overwhelming volume of consumer-to-business retail activity sits well below the Rs 2,000 mark. Direct Peer-to-Peer Transfers Remain Completely Free The revised MDR directives deliberately exclude peer-to-peer UPI transfers. Individuals transferring money directly between one another will not face any deductions or fees, regardless of how much capital is moved. Whether sending Rs 5,000 to assist a friend or remitting Rs 50,000 to a relative, peer-to-peer transactions carry zero MDR. Protecting these transfers is central to maintaining UPI's widespread adoption. Official notification data reveals that peer-to-peer movements represent approximately 37 percent of aggregate UPI transaction volume and nearly 70 percent of overall transaction value. Exempting this substantial segment ensures that standard personal financial interactions face no operational frictions. Protective Measures for Small Sellers and Street Vendors Informal retail operators and local sellers receive defined safeguards through the Person-to-Person-Merchant (P2PM) classification. Sellers operating within this tier are entitled to zero MDR on cumulative monthly collections reaching up to Rs 1 lakh. This protection is specifically directed at micro-merchants and roadside vendors who routinely collect customer payments via basic QR configurations without maintaining institutional merchant billing setups. Retaining free processing for this segment prevents operating overheads from rising, supporting their continued participation in digital payments. Fixed Tariffs for Essential Services and Utilities The standard 0.4 percent rate will not be implemented across every commercial segment. Essential public utilities and critical services have been assigned a specialized pricing mechanism. For transactions above Rs 2,000 involving railways, telecommunications, insurance premiums, and fuel purchases, a flat MDR of Rs 5 per transaction has been established. Because this rate is fixed, the fee remains exactly Rs 5 regardless of the overall invoice total, bypassing the percentage-driven scale seen in regular merchant categories. This approach prevents sharp operational cost increases on high-ticket transport reservations or insurance renewals. Tailored Framework for Capital Markets and Securities Investments and dealings in capital markets have also been granted an adjusted, lower fee tier. Eligible digital transfers directed toward mutual funds, securities, licensed stockbrokers, and financial dealers will attract an MDR of just 0.02 percent. Similar to large retail payments, this category is protected by a strict maximum cap of Rs 300 per transaction. Transactions inside financial markets frequently involve capital volumes far larger than customary consumer retail baskets. Applying standard retail percentage charges would have created disproportionately heavy clearing costs. Setting a calibrated rate of 0.02 percent alongside a Rs 300 limit balances network economics while keeping financial investments frictionless. What this means for you Regular consumer peer-to-peer transfers and small retail transactions remain completely free, with updated processing fees applying strictly at the merchant backend for larger bills. • For Everyday Consumers: Direct money transfers to contacts and retail purchases up to Rs 2,000 attract zero additional charges. You can continue scanning codes for daily groceries, food, and medicines without worrying about deductions. • For Retail Merchants: Eligible commercial collections exceeding Rs 2,000 will be subject to an internal 0.4 percent MDR structure. However, small informal vendors remain safeguarded with zero fees on monthly P2PM volumes up to Rs 1 lakh. • For High-Value Transactions: Commercial payments of Rs 75,000 and above have their MDR capped at Rs 300 per transaction. This boundary prevents processing expenses from scaling uncontrollably on expensive purchases. • For Utility and Travel Expenses: Payments above Rs 2,000 for railways, telecom, insurance, and fuel attract a flat fee of just Rs 5 per transaction. This flat rate avoids percentage-based fee increases on essential long-distance travel and premium renewals. Why this happened The revised fee structure addresses processing sustainability among banks and payment applications while preserving widespread adoption through targeted exemptions. Authorities sought to balance network maintenance economics without disrupting low-ticket retail commerce. • Infrastructure and Processing Costs: Operating high-capacity payment switches requires continuous technical funding shared across banks and applications. Introducing a calibrated 0.4 percent MDR on larger commercial tickets helps offset ecosystem operational expenses. • Government Policy Framework: A central government notification on September 14 affirmed the continuation of zero MDR on merchant payments up to Rs 2,000. Regulators structured the new merchant rules directly around this official threshold. • Preserving Digital Momentum: Approximately 96 percent of merchant volumes remain below Rs 2,000, while peer-to-peer flows generate 70 percent of transaction values. Keeping these vital segments cost-free prevents operational friction for everyday citizens. Questions & Answers 1. Will users be charged when transferring money to friends or family? No, person-to-person transfers remain entirely free of charge regardless of the transferred amount. 2. What happens to merchant payments below Rs 2,000? All merchant payments up to Rs 2,000 continue to enjoy a zero-MDR status with no processing fees applied. 3. How much MDR applies to commercial purchases above Rs 2,000? Eligible person-to-merchant payments exceeding Rs 2,000 attract a 0.4 percent MDR within the processing network. 4. Is there an upper ceiling on the MDR for high-value transactions? Yes, for merchant transactions of Rs 75,000 and above, the fee is capped at a maximum of Rs 300 per transaction. 5. What exemptions apply to street sellers and informal vendors? Small sellers in the P2PM category are exempt from MDR on monthly volumes up to Rs 1 lakh. 6. What are the charges for railway bookings, telecom, and fuel? Payments above Rs 2,000 for railways, telecom, insurance, and fuel attract a flat fee of Rs 5 per transaction. 7. How are stock brokerage and mutual fund transactions charged? Payments for securities and mutual funds incur a 0.02 percent MDR, subject to a ceiling cap of Rs 300 per transaction. https://trendkia.com/en/business/npci-ne-bare-upi-marchenta-bhugatanon-para-taya-kiya-0-4-pratishata-mdr-2-000-rupaye-taka-ke-lena-dena-aura-ama-transaphara-puri-t-33916 TrendKia — Har trend, sabse pehle.