NPCI Committee To Decide UPI MDR Charges Soon; Large Merchant Transactions May Face Fees

The UPI and Services Steering Committee of the National Payments Corporation of India (NPCI) is likely to meet this week to finalise the merchant discount rate (MDR) framework for digital payments, according to a report by Moneycontrol.

The meeting follows the government’s September 14 notification that formally introduced provisions related to MDR charges.

NPCI operates both the Unified Payments Interface (UPI) platform and the RuPay card network, while MDR refers to the fee paid by merchants to banks and payment ecosystem participants for processing digital transactions.

Committee to decide UPI MDR structure

According to the notification, banks will not be allowed to impose charges on UPI transactions up to ₹2,000 or payments made through RuPay debit cards. Person-to-person UPI transfers will continue to remain free.

However, the notification does not specify whether MDR will apply only to large merchants, leaving the final decision with the UPI Steering Committee, which determines rules governing the platform.

The committee comprises 22 members representing public sector banks, private banks, small finance banks, UPI applications and industry bodies, including the Indian Banks Association and Payments Council of India.

The meeting is expected to be chaired by NPCI Managing Director and CEO Dilip Asbe along with Executive Director for Growth Sohini Rajola.

Revenue sharing framework under discussion

Apart from deciding MDR rates, the committee is also expected to create a mechanism for distributing MDR income among ecosystem participants. These include issuing banks, UPI applications, PSP banks and payment aggregators that onboard merchants.

MDR will apply only to merchant transactions and will not affect consumers using UPI for personal transfers. Industry estimates suggest charges of around 25-30 basis points could be introduced for transactions above ₹2,000 and for large merchants.

Unlike UPI, card payments already carry MDR charges, with debit card rates around 80-90 basis points and credit card charges reaching up to 250 basis points.

Preliminary calculations indicate that a 25 basis point MDR on eligible merchant transactions could generate nearly ₹13,000 crore annually, providing additional revenue for the digital payments ecosystem.