In a notice dated September 14, the Finance Ministry has clarified that the UPI transactions up to Rs 2,000 will not attract any direct or indirect charges. Banks and payment system providers cannot impose fees on these transactions. RuPay debit card payments have also been included under the protected electronic payment modes.
The clarification does not mean that the consumers will automatically be charged when they make payments above Rs 2,000, it said. As per the revised Payment and Settlement System Act, a framework under which charges could be introduced in specific circumstances, the government has previously indicated that any merchant discount rate would apply only to certain merchant transactions above a specific threshold, while consumers will not be charged anything for their transaction.
Therefore, Rs 2,000 should not be viewed as a ceiling for free UPI transactions. However, there is no government-notified consumer fee that applies simply because the UPI payment exceeds this amount.
The merchant discount rate is a fee paid within the payment ecosystem for processing the digital transactions by the merchant. According to industry experts, a nominal rate of around 0.25 to 0.4 percent could apply to selective merchant payments, although no such rate has been announced officially.
The debate over the MDR comes as UPI usage continues to expand rapidly amongst consumers. The number of banks offering UPI services, spiked from 44 a decade ago to 741 by July this year, with monthly transactions being touched a record Rs 2,366 crore.