The merchant discount rate (MDR) regime for UPI transactions was announced on Tuesday (September 15). MDR is the fee merchants pay to the entities that help facilitate a digital transaction: banks, payment service providers, and third-party apps.

It will be levied if you make a payment to a merchant above Rs 2,000, at a uniform rate of 0.4% (with a few exceptions). This is supposed to be a charge “within the merchant payment ecosystem” — and not on customers making UPI payments.

The government has “advised” banks to ensure that merchants do not pass MDR charges to customers. UPI application providers are “expressly prohibited from imposing platform fees or hidden charges”, the Finance Ministry said.

No such levy will be made on person-to-person payments — that is, if you pay a friend or family member — irrespective of the transaction amount.

The announcement comes a day after the government exempted all UPI payments up to Rs 2,000 and RuPay debit card transactions from any bank charges.

The finalised MDR framework and threshold structure will be effective from October 15