UPI Payments via Credit Cards will remain exempt from the new 0.4% Merchant Discount Rate (MDR), offering relief to users as revised UPI charges take effect from October 15. The government has clarified that credit card-linked UPI payments, including those made through RuPay credit cards and pre-sanctioned bank credit lines, will not come under the new MDR framework.

Key Highlights

• UPI Payments via Credit Cards will remain exempt from the new 0.4% MDR framework from October 15.
• Certain direct UPI merchant payments above Rs 2,000 will attract MDR, capped at Rs 300 per transaction.

Credit Card-Linked UPI Payments Exempt From New MDR

The government has clarified that transactions made using RuPay credit cards linked to UPI will not come under the new 0.4% MDR regime. UPI Payments made through pre-sanctioned bank credit lines will also remain outside the revised framework.

Since these transactions involve credit extended by the issuing bank, they will continue to be governed by the applicable regulations covering credit cards and other credit products.

The revised MDR framework instead focuses on direct user bank account-to-merchant bank account UPI payments.

What Are the New UPI Charges From October 15?

Under the revised framework, certain person-to-merchant (P2M) UPI transactions above Rs 2,000 will attract MDR. For specified payments above Rs 2,000 threshold, a 0.4% MDR will apply, subject to a maximum of Rs 300 per transaction.

Some merchant categories will instead attract a flat Rs 5 MDR when transaction values exceed Rs 2,000. These include payments related to:

• Railways
• Telecom services
• Insurance
• Fuel

The revised structure differentiates MDR rates based on the type and economics of the merchant transaction.

Lower MDR for Capital Market Transactions

A separate MDR rate of 0.02% will apply to UPI payments linked to capital-market transactions. This includes payments involving mutual funds, securities, stock brokers and dealers. The MDR for these transactions will also be capped at Rs 300 per transaction.

Also Read: UPI Transaction Volume Hits Record 24.51 Billion in August: NPCI Data

Will Most UPI Transactions Remain Free?

The revised framework is expected to affect only a limited portion of merchant UPI payments. According to the source, around 4% of merchant transactions are expected to fall under the new MDR structure, while more than 95% of UPI person-to-merchant transactions will continue without MDR.

Small merchants operating under the P2PM model will also continue to benefit from zero MDR. Individual users will not face a monthly quota or transaction limit for accessing free UPI payments.

5% of MDR Collections to Support Small Merchants

The revised framework also proposes a dedicated fund to support greater UPI acceptance among small merchants. Under the framework, 5% of the total MDR collected will be directed towards this fund, with the objective of encouraging smaller businesses to adopt and accept UPI payments.