Who Will Pay Rs 5 MDR If You Buy Rs 2,500 Petrol And Pay Through UPI? NPCI Answers

Payments through the Unified Payments Interface (UPI) above Rs 2,000 to essential sectors, including railways, telecommunications, insurance, fuel and agricultural inputs, will now attract a flat Merchant Discount Rate (MDR) of Rs 5 per transaction, the government said on Tuesday, September 15.  Meanwhile, you might be wondering, if you fill petrol or diesel worth Rs 2,500, will you or the petrol pump merchant pay the Rs 5 MDR?. 

As per the Ministry of Finance, no end consumer will pay fees on any UPI transactions, and the MDR will be subject to payment between the merchant and the bank. The framework ensures consumers pay only the posted price. 

The NPCI in its FAQs also said that merchants onboarded cannot pass on MDR charges to customers while accepting payments through UPI. 

"MDR is a charge within the merchant payment ecosystem. It is not a charge on customers making UPI payments," the Ministry of Finance emphasised in a press release. 

Additionally,  the ministry said that banks have been advised to ensure that merchants do not pass MDR charges on to customers. 

"UPI application providers are expressly prohibited from imposing platform fees or hidden charges," the ministry stated.  

All payments below Rs 2,000 for these essential services will not have zero MDR. Additionally, individuals will continue to have unlimited free usage, meaning there are no monthly quotas, volume restrictions or tiered caps levied on free UPI transactions.

0.4% MDR For Above Rs 2,000 (P2M) Payments 

Person-to-Merchant (P2M) transactions above Rs 2,000 will attract a 0.4 per cent Merchant Discount Rate (MDR). However, the fee will be shared among the facilitators, including banks and App providers, the government said.

"A nominal MDR of 0.4% will be levied on P2M transactions above Rs 2,000. This commission will be shared amongst the payment ecosystem partners, including banks and app providers," the Ministry of Finance said.

Additionally, for high-value transactions of Rs 75,000 and above, MDR will be capped at Rs 300 per transaction. Meanwhile, according to the government, person-to-person (P2P) transactions will not attract any charges irrespective of transaction value.

"For person-to-person (P2P) transactions, there will be no charges at all, irrespective of transaction value. P2P transactions constitute 37 per cent of the total UPI transactions in volume terms and 70 per cent in value terms," the ministry stated.

Capital market transactions

Payments made for mutual funds, securities, stock brokers, and dealers through UPI will attract a nominal MDR of 0.02 per cent, and the maximum MDR has been kept at Rs 300.

"This reduced rate encourages retail participation in formal financial markets," the government said. 

Also Read: UPI Payment Charges: 0.4% MDR For Merchants From Oct 15, Zero Fees On Person-To-Person Transactions

Will Small Vendors Pay MDR?

Small merchants--Street vendors and other small business owners-- who get up to Rs 1 lakh per month via UPI QR codes under the Person-to-Person-Merchant (P2PM) will not have to pay MDR. 

"Small merchants receiving up to Rs 1 lakh per month via UPI QR codes under the Person-to-Person-Merchant (P2PM) classification will continue to enjoy mandatory zero MDR for all transactions," the ministry informed. 

UPI App To Not Levy Platform Fee

The UPI app providers are explicitly prohibited from levying platform fees or hidden charges. Additionally, Banks have been advised to ensure that merchants do not pass MDR charges to customers for UPI payments.