What changes take effect
From 15 October, the Merchant Discount Rate (MDR) on UPI payments will apply to targeted person-to-merchant (P2M) transactions above ₹2,000. The burden is typically on merchants, not customers.
The legal position
Regulators have emphasized that shifting this cost to end users could constitute a criminal offence under the current payment systems framework, and service providers should absorb the MDR or adjust merchant pricing instead of charging customers.
Industry response
Fintech lawyers and analysts say attempts to disguise MDR as a customer fee may invite regulatory penalties or sanctions for unfair practices, depending on applicable RBI rules and statutes.
Key takeaways
- Effective from 15 October, MDR on UPI will cover specified P2M transactions above ₹2,000
- The fee is intended for merchants, not end consumers
- Passing MDR to customers is described by authorities as a criminal offence under current rules
- Experts recommend transparent pricing or absorbing the cost rather than levying it on customers
