The Union Government has amended the Payment and Settlement Systems (PSS) Act, 2007, to pave the way for a 0.4% Merchant Discount Rate (MDR) on person-to-merchant transactions above Rs 2,000.
The government
said no charges will be levied on person-to-person (P2P) transactions, irrespective of transaction value. However, a nominal MDR of 0.4% will apply to person-to-merchant (P2M) transactions exceeding Rs 2,000.
Furthermore, MDR will be capped at Rs 300 per transaction for high-value transactions of Rs 75,000 and above. Railways, telecom, insurance, fuel sectors, and agriculture inputs will pay a flat MDR of Rs 5 per transaction above Rs 2,000.
How Will This Affect You?
It is important to note that individuals will not be charged for using UPI while lending money to another individual, even if the amount exceeds Rs 2,000. The MDR will be applicable only to a customer during a purchase of above Rs 2,000.
There is no impact on small-value UPI transactions of up to Rs 2,00, which comprise at least 96% of the total volume of P2M UPI transactions. This ensures that micro and small businesses remain shielded from cost burdens.
The MDR is a merchant-side cost, meaning it would be passed to merchants first. However, if P2M transactions exceed Rs 2,000, customers could feel the impact if businesses pass the charge on to them. For example, for a transaction of Rs 2,500, the MDR cost would be Rs 10, for which the customer would be required to pay Rs 2,510.
Similarly, for P2M transactions of Rs 5,000, the customer could pay Rs 5,020, and for transactions of Rs 10,000, the customer could be required to pay Rs 10,040.
