Merchant fees on UPI, RuPay debit cards may return

UPI and RuPay transactions are controlled by the National Payments Corporation of India (NPCI). Merchants pay the MDRs to banks for real-time payment processing.

Before 2022, merchants had to pay banks a discount rate below 1% of the transaction value. It was removed in the FY2022 budget to promote digital payments, and it worked as UPI became the most widely used payment mode.

The government is considering introducing a tiered pricing mechanism to charge the fee only to large businesses with annual GST turnover over ₹40 lakhs. The fee will be lower for smaller merchants, and free for those with a yearly turnover of less than ₹40 lakhs.

Big retail businesses mostly use credit and debit cards for over half of their payments and pay MDR for the transactions. A minor fee on UPI payments would not have any significant impact.

MDR can help payment aggregators make their businesses profitable.

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