A 0.4% charge will apply to UPI payments above Rs 2,000 made to merchants, effectively ending the merchant discount rate (MDR) regime after six years.

The maximum charge will be capped at Rs 300 for UPI payments of Rs 75,000 or more. Small merchants earning up to Rs 1 lakh per month through UPI QR codes will remain exempt from the new charge.

Railways, telecom, and fuel transactions will attract a flat Rs 5 fee per transaction, while capital-market transactions will have a lower rate of 0.02%. Person-to-person (P2P) UPI transfers will remain unaffected. According to the record, P2P transactions account for about 37% of UPI transaction volume and 70% of its value.

UPI app providers will not be allowed to add separate platform fees, and banks have been instructed to prevent merchants from passing the MDR cost directly on to customers.

While consumers will not be directly impacted by the change, the new regime has sparked discussion among UPI users. For now, the Congress has accused the government of imposing the fee on vendors to open up digital payments to American firms.

Large businesses are likely to feel the impact of the move. For now, customers remain protected from the direct cost, but businesses may respond by encouraging greater use of cash.