The government on Monday opened an avenue for banks to impose charges on Unified Payments Interface (UPI) transactions above ₹2,000.
The government specified RuPay-powered debit cards and UPI transactions of up to ₹2,000 in a gazette notification and said, “No bank or system provider shall impose, whether directly or indirectly, any charge upon a person making or receiving a payment by using the electronic modes of payment.”
This essentially suggests banks may levy charges on UPI payments above ₹2,000. The final call on whether banks impose charges at this very threshold, as well as the magnitude of the merchant discount rate (MDR), remains with the UPI and Services Steering Committee headed by the National Payments Corporation of India (NPCI).
MDR is the fee that merchants pay to banks and payment service providers for processing digital payment transactions. Currently, merchants do not pay for accepting UPI payments, unlike other instruments such as debit or credit cards.
The government had earlier clarified that an MDR on UPI will only apply to a “limited set of merchant transactions over a certain threshold” at a fee lower than that for credit and debit cards. It had stated that peer-to-peer (P2P) transactions would continue to remain free.
Industry sources believe that a final MDR slab would be in the range of 25 to 40 basis points (bps).
