ITANAGAR, Sep 21: The Unified Payments Interface (UPI) payments of merchant discount rate (MDR) fee on select transactions has been proposed by the GoI from October 15.
Under the new system, the UPI payments to merchants above  ₹2,000 will attract an MDR of 0.4%. Previously, no such fee was charged on any UPI transaction.
The MDR fee will be charged for transactions where one pays directly to a merchant. The new MDR will apply to direct person-to-merchant (P2M), UPI transactions above ₹2,000 from October 15. If a UPI payment of ₹2,000 or above is made to a shop, the transaction will attract an MDR of ₹8. But the GoI has clarified that this fee will be paid by the merchant.
For transactions above  ₹75,000, the GoI says, MDR fee will be capped at ₹300. Even if one makes a payment of over ₹1 lakh to a merchant via UPI, the merchant will  pay ₹300 as MDR.
Official estimates state that payments above ₹2,000 would cover about 5% of all UPI transactions but 65% of total transaction value. Transactions under ₹2,000 will not attract any MDR and remain free.
Reacting to this proposal, Arunachal Chamber of Commerce and Industries (ACC&I) president Tarh Nachung urged the GoI to raise the limit from ₹2,000 to above ₹10,000 for charging MDR fee.
Cashless transaction, particularly UPI, was introduced in India in January 2020, the MDR for RuPay Debit Card and BHIM-UPI transactions for no charge as an incentive to promote digital transactions by small merchants with an estimated outlay of ₹1,500 crore from April 2024 to March 2025.
According to official records, India leads globally as of 2025 in real-time payment volumes, with UPI transactions growing significantly, reflecting a strong shift towards a cashless economy. This initiative aimed at enhancing financial inclusion, reduce tax evasion and improve overall economic efficiency.
However, the proposed MDR fee would hit hard small merchants, like pan wala, sabji wala, machli wala and thela wala, defeating the very purpose of introducing cashless transactions.
Therefore, it would amount to withdrawing the so-called incentive announced to encourage cashless transactions. Thus, the limit should be raised to not affect small traders.
If the GoI fails to fulfil this demand, the ACC&I would decide its future course of action.

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Kenter Joya Riba

(Managing Editor)
      She is a graduate in Science with post graduation in Sociology from University of Pune. She has been in the media industry for nearly a decade. Before turning to print business, she has been associated with radio and television.
Email: kenterjoyaz@easternsentinel.in / editoreasternsentinel@gmail.com
Phone: 0360-2212313

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