Why in news
- Government and NPCI clarified the regulatory framework governing Merchant Discount Rate (MDR) on UPI transactions.
Key terms
Merchant Discount Rate (MDR)
Fee charged to merchants for accepting digital payments, distributed among payment infrastructure providers.
P2M Transaction
Person-to-Merchant transfer conducted via digital payment channels for commercial purchase of goods or services.
What is the Regulatory Framework?
- Unified Payments Interface (UPI) was developed by National Payments Corporation of India (NPCI) under the Payment and Settlement Systems Act, 2007.
- MDR is a fee split among acquiring banks, issuing banks, and payment service providers (PSPs) to cover infrastructure and transaction processing costs.
Key Provisions of the Current Architecture
- All Person-to-Person (P2P) transfers remain completely free of transaction charges, accounting for 70 percent of total UPI transaction value.
- Person-to-Merchant (P2M) payments up to Rs 2,000 and payments received by small merchants (receiving up to Rs 1 lakh monthly) are exempt from MDR under zero-MDR rules.
- MDR applies selectively to non-exempt merchant transactions exceeding Rs 2,000, leaving approximately 96 percent of merchant transactions unaffected.
Why it matters
- Ensures financial inclusion for retail micro-merchants while providing revenue sustainability for digital payment service providers.
- Exposes Prelims clarity on MDR identity: MDR is an ecosystem fee shared among financial intermediaries, not a government tax.
Prelims facts
- P2P transactions on UPI carry zero charges under current regulatory guidelines.
- MDR is not a government tax but a service fee distributed between payment apps and banking intermediaries.
Mains discussion
- Balancing financial inclusion via zero-MDR against long-term commercial viability of payment system providers.
Source: PIB English
समान विषय · पिछले पेपर
UPSC ने यह पहले भी पूछा है
ये पिछले वर्षों के प्रश्न उसी विषय पर हैं। अभ्यास के लिए खोलें।
-
2018 · Q6 · General Studies · 2 marks
Which one of the following best describes the term "Merchant Discount Rate" sometimes seen in news? -
2025 · Q69 · General Studies · 2 marks
Consider the following countries : I. United Arab Emirates III. France III. Germany IV. Singapore V. Bangladesh How many countries amongst the above are there other than India where international merchant payments are accepted under UPI? -
2018 · Q56 · General Studies · 2 marks
Consider the following statements: 1. The Reserve Bank of India manages and services Government of India Securities but not any State Government Securities. 2. Treasury bills are issued by the Government of India and there are no treasury bills issued by the state Governments. 3. Treasury bills are issued at a discount from the par value. Which of the statements given above is/are correct? -
2026 · Q8 · GS II · 10 marks
Analyse the advantages and limitations of the generalist structure of the Indian Civil Services in contemporary governance. -
2026 · Q82 · General Studies · 2 marks
Which of the following statements with regard to the Grand Slam Tennis Tournaments is/are correct? 1. The tournaments have a shared governance structure establishing the partnership among the four Grand Slam tournaments. 2. They are open for entry to all internationally ranked tennis players above the age of 14. 3. There is a limitation on the number of 'Wild Cards' a player may receive to compete in a Grand Slam Tournament. Select the answer using the code given below: