MDR on UPI not influenced by external pressure: Nirmala Sitharaman
What's the story
Finance Minister Nirmala Sitharaman has dismissed allegations that the decision to introduce a 0.4% Merchant Discount Rate (MDR) on select Unified Payments Interface (UPI) transactions was influenced by external pressure. The MDR will be applicable on person-to-merchant UPI payments above ₹2,000 from October 15. Sitharaman clarified that the decision was taken professionally and not imposed by the government or any foreign entity.
Clarification
MDR is not a tax or cess: Sitharaman
Sitharaman clarified that the MDR is not a tax or cess and will not go to the government's Consolidated Fund.
She said, "Absolutely baseless. And I totally deny it," when asked about allegations of external pressure influencing the decision.
The Finance Minister also criticized opposition parties for making unfounded allegations without fully understanding the issue at hand.
Revenue allocation
Revenue sharing among banks and UPI ecosystem players
The MDR revenue will be shared among banks and other players in the UPI ecosystem.
Of the total collected, 40% will go to customer banks, 30% to payment gateways, 20% to UPI apps, and the remaining 10% to sponsoring banks of these apps.
Essential services like railways, telecoms, fuel stations, and insurance companies will have a flat ₹5 fee per transaction above ₹2,000.
Merchant exemptions
Small merchants fully exempt from new charge
Small merchants earning up to ₹1 lakh a month via UPI QR codes are fully exempt from the new charge, covering about 96% of all merchant transactions.
Capital markets transactions (mutual funds, stockbroking) will attract a lower 0.02% rate, also capped at ₹300.
The National Payments Corporation of India (NPCI), which runs the UPI platform, issued a circular on September 15 introducing MDR on select UPI transactions.