The Centre plans to introduce a merchant discount rate, or MDR, on large UPI payments. Here is what the proposal means for shoppers and businesses.

MDR is a fee merchants pay to payment service providers. Under the plan, person-to-merchant UPI payments above Rs 2,000 would attract a 0.4 percent charge, capped at Rs 300 per transaction. On a Rs 10,000 payment, the charge would be Rs 40.

For consumers, nothing changes. Punjab and Sind Bank MD Swarup Kumar Saha has said merchants cannot pass the charge to buyers. You will pay only the listed price. Person-to-person transfers and payments up to Rs 2,000 stay free.

Over 95 percent of merchant UPI payments by volume are below Rs 2,000, so most small shops are unaffected. The rollout from October 15 may be deferred to January 1, 2027. A proposal to exempt businesses with turnover up to Rs 40 lakh is also under review.