UPI Rules: What Will Stay Free?

UPI has transformed everyday payments across India, making transactions quick and convenient.

However, upcoming changes to the payment framework have sparked concerns among users about whether they will face new charges while making UPI payments to merchants.

From October 15, several UPI services will continue to remain completely free for individuals.

Most importantly, customers will not have to pay Merchant Discount Rate (MDR) when making eligible payments.

Person-to-person UPI transfers will remain free, regardless of the amount. Similarly, people receiving money through UPI will not face any charge.

Payments made to merchants up to ₹2,000 will also remain free of MDR. Therefore, customers can continue scanning a shop’s QR code and paying ₹500, ₹1,000 or ₹2,000 without an additional fee.

Moreover, individuals will not face any monthly UPI usage charge or transaction quota. This means regular users can continue using UPI without paying based on how frequently they make payments.

Small merchants will also retain an important benefit. Eligible merchants receiving up to ₹1 lakh per month through UPI QR codes under the P2PM category will continue to enjoy zero MDR.

This provision covers eligible neighbourhood shops and street vendors.

Meanwhile, the new MDR applies to specified merchant transactions above ₹2,000. However, this is a charge within the payment ecosystem and is not a customer fee or government tax.

For instance, a ₹10,000 eligible merchant transaction could attract an MDR of ₹40. However, customers should not be asked to add that amount to their payment.

Banks have been advised to prevent merchants from passing the MDR cost to customers.

Payments for essential services above ₹2,000 will follow separate MDR rates under the new framework.

However, individual users will continue to enjoy free person-to-person transfers and receiving money.

Eligible merchant payments up to ₹2,000 will also remain free, ensuring everyday UPI transactions do not attract charges.

Image from Pxhere (Free for commercial use / CC0 Public Domain)

Image published on March 16, 2017

Image Reference: https://pxhere.com/en/photo/1163781