UPI MDR for Large Merchants: Fintech Proposal Explained
Why in the news
Sources said India’s fintech sector was considering a Merchant Discount Rate on UPI for big businesses only, sparing users and small shops. The Finance Ministry meanwhile restated that it had no plan to charge MDR on UPI.
Key facts
- Proposal limits MDR to large merchants such as e-commerce platforms and high-turnover firms.
- More than 90% of the 60 million UPI-accepting merchants would be exempt, notably those with turnover of ₹20 lakh or less a year.
- Customers pay zero on UPI.
What is MDR
- A fee merchants pay to banks or processors for handling card and digital payments.
- Covers infrastructure and service costs.
- Usually a percentage of the transaction, varying with payment method, volume and merchant type.
Impact and policy background
| Step | Purpose |
|---|---|
| Zero MDR on RuPay debit cards and BHIM-UPI | Encourage adoption |
| Incentive scheme for low-value UPI | Support service providers in the payments ecosystem |
| Keeping UPI free | Maintain use and avoid burdening merchants |
Exam angle
- Full form: Merchant Discount Rate.
- Present status: zero MDR on UPI and RuPay debit cards; no plan to change.