Daijiworld Media Network – New Delhi

New Delhi, Sep 25: Indian banks will monitor merchants to ensure that the Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions is not passed on to consumers, according to a report by news agency.

The Finance Ministry will hold a meeting with the Indian Banks' Association (IBA) and the Confederation of All India Traders (CAIT) to discuss the MDR issue.

The IBA will establish a mechanism to ensure that merchants do not transfer the MDR burden to customers, the report said.

From October 15, a 0.4 per cent MDR will apply to person-to-merchant (P2M) UPI transactions above Rs 2,000. The charges will be borne by merchants and not consumers, with the fee capped at Rs 300 for transactions of Rs 75,000 or more.

Payments between individuals and most everyday merchant transactions will continue to remain free.

Transactions above Rs 2,000 in essential sectors such as railways, telecommunications, fuel, insurance and agricultural inputs will attract a flat MDR of Rs 5 per transaction.

Payments related to mutual funds, securities, stockbroking and dealers will attract a lower MDR of 0.02 per cent, capped at Rs 300 per transaction.

Small merchants collecting up to Rs 1 lakh per month through UPI QR codes under the Person-to-Person-Merchant (P2PM) category will remain fully exempt from MDR charges.

According to officials, the exemption is expected to cover around 96 per cent of all merchant transactions.

UPI app providers will not be permitted to impose platform fees or hidden charges. Banks have also been advised to ensure that merchants do not pass MDR costs on to customers.

Individuals will continue to enjoy free UPI transactions without monthly quotas, volume limits or tiered caps.