Govt notifies rules on UPI MDR; NPCI expected to issue circular in two weeks
The government has, however, specified that banks and other system providers cannot impose any charge on RuPay-powered debit cards and UPI payments of up to Rs 2,000.
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The government has, however, in a gazette notification dated September 14, specified that banks and other system providers cannot impose any charge on RuPay-powered debit cards and UPI payments of up to Rs 2,000.
According to sources, NPCI is expected to come up with a circular on MDR on UPI in two weeks. The MDR is expected to be about 0.40%.
MDR, which is the fee merchants pay banks and payment companies for processing digital transactions, has been a hot topic of discussion ever since the government scrapped MDR on UPI and RuPay debit card transactions in January 2020 to push mass digital payments.
Last month, in August, the debate around MDR came back in full force after the government tabled a Bill in Parliament to amend the Payment and Settlement Systems Act, 2007. This time, it was clear that this was not just another legislative update, as back-to-back statements from the Reserve Bank of India (RBI), the government and almost every major stakeholder in the UPI ecosystem poured in.
The Head and Tale did a detailed explainer video to break down what the amendment in the Bill means.
One of the aspects we highlighted in the video was how it opens the door to pricing "one or more electronic payment methods." This technically means the government now has the legal room to think about pricing frameworks for other networks too.
And this is where the MDR debate gets interesting. Because the question is no longer whether UPI will have MDR. It is also about who gets charged, who gets paid and, ultimately, who benefits from bringing pricing back into India’s digital payments ecosystem.
The government has now made it clear that UPI payments up to Rs 2,000 will remain free. But beyond that threshold, the details are still to be worked out.