Finance Ministry Defends UPI MDR Levy as Impact Set at 4%
By ThePip Desk
Indian Finance Ministry clarifies that the new 0.4% UPI MDR on transactions over Rs 2,000 affects only 4% of volume and won’t push users to cash.
The Indian Finance Ministry stated that the introduction of a 0.4% Merchant Discount Rate on select UPI transactions exceeding Rs 2,000 is unlikely to discourage digital payments or push users toward cash. Government sources indicated that this new levy takes effect on October 15 and will impact only about 4% of total UPI transaction volume.
Key Numbers and Transaction Exemptions
The ministry outlined specific exemptions and monitoring measures surrounding the implementation of the new policy:
- 0.4% Merchant Discount Rate applied to select UPI transactions exceeding Rs 2,000.
- October 15 is the effective date for the new levy.
- 4% of total UPI transaction volume impacted by the rate.
- Rs 1 lakh monthly collection limit via UPI QR codes for small merchants to remain exempt.
- 96% of all merchant transactions covered by the small merchant exemption.
Monitoring and Ecosystem Sustainability
The ministry is establishing a monitoring mechanism to ensure that merchants and payment service providers do not pass these costs on to consumers. Officials clarified that the policy is designed to create a sustainable revenue model for the digital payments ecosystem and to promote the use of RuPay. Furthermore, the ministry explicitly rejected allegations that the decision was influenced by pressure from the United States, noting that RuPay debit card transactions will remain free regardless of the amount.