The government has issued an official clarification regarding recent developments in the Unified Payments Interface (UPI) system, addressing concerns among users about potential charges. The statement confirms that UPI transactions will remain completely free for all person-to-person payments, regardless of the transaction amount. This clarification comes amid confusion in the digital payments ecosystem about the implementation of merchant discount rates and their impact on everyday users.
According to the official statement, payments received by eligible small merchants operating under the zero-MDR framework will also continue to remain free of charge. The Merchant Discount Rate (MDR) has been specifically defined as a charge within the merchant payment ecosystem and not a fee imposed on customers making UPI payments. The government emphasized that MDR operates exclusively within the business-to-business payment structure and does not affect individual users conducting transactions.
Banks across the country have been formally advised to ensure that merchants do not pass on MDR costs to customers during payment transactions. The regulatory authorities have made it clear that any attempt to transfer these charges to consumers would violate the guidelines. The clarification also addressed misconceptions about the nature of MDR, stating explicitly that it is neither a tax nor a charge collected by the government. Instead, the MDR is distributed among various participants in the digital payments ecosystem to support and maintain the UPI infrastructure.
The distribution of MDR among ecosystem participants includes payment service providers, banks, and technology platforms that facilitate seamless digital transactions. This revenue-sharing mechanism is designed to ensure the sustainability and continued development of the UPI platform, which has become one of the most widely used digital payment systems in India. The government’s statement reaffirms its commitment to keeping digital payments accessible and affordable for all users while maintaining a viable ecosystem for service providers and merchants.
