UPI transactions remain entirely free for personal use and 96 percent of merchant payments under the updated policy framework.
Distilled Policy Brief
- All Person-to-Person (P2P) UPI transactions remain entirely free regardless of the transferred amount, shielding 70% of total transaction value from any MDR framework.
- Merchant transactions up to ₹2,000 and payments up to ₹1 lakh per month via UPI QR codes for small vendors under the zero-MDR framework remain unaffected, covering 96% of total merchant transactions.
- A nominal Merchant Discount Rate (MDR) of 0.4% is applicable only on specified Person-to-Merchant (P2M) transactions exceeding ₹2,000, distributed among ecosystem participants to ensure long-term UPI sustainability under the Payment and Settlement Systems Act, 2007.
🎯 Prelims High-Yield Examination Points
Under the new UPI framework, MDR is not a tax or government levy; it is distributed among banks and payment apps. P2P transactions are 100% free, and MDR applies only to specific P2M transactions above ₹2,000, regulated under the Payment and Settlement Systems Act, 2007.
⚖️ Mains Analytical & Syllabus Linkages
Analyze how rationalizing the Merchant Discount Rate (MDR) for large UPI transactions while keeping small and retail transactions free balances digital public infrastructure (DPI) sustainability with financial inclusion.
🎯 UPSC Prelims Practice Drill
Consider the following statements regarding the Unified Payments Interface (UPI) framework in India: 1. All Person-to-Person (P2P) UPI transactions are entirely free irrespective of the transferred amount. 2. A nominal Merchant Discount Rate (MDR) is levied on all Person-to-Merchant (P2M) transactions, including those up to ₹2,000. 3. The Merchant Discount Rate (MDR) collected on applicable transactions is a tax levied directly by the Government of India and NPCI. Which of the statements given above is/are correct?
- [A] 1 only
- [B] 1 and 2 only
- [C] 2 and 3 only
- [D] 1, 2 and 3
▶ Reveal Official Answer & Analytical Explanation
Statement 1 is correct because all Person-to-Person (P2P) UPI transactions remain entirely free regardless of the transferred amount. Statement 2 is incorrect because Merchant transactions up to ₹2,000 and payments under the zero-MDR framework remain completely free. Statement 3 is incorrect because MDR is explicitly clarified to be neither a tax nor a fee levied by the government or NPCI, but is instead distributed among ecosystem participants like banks and payment app providers.
🏛️ Historical Twin PYQ Anchor (2021)
Consider the following statements regarding the "National Clean Air Programme (NCAP)": 1. It is implemented by the Ministry of Environment, Forest and Climate Change. 2. Central Pollution Control Board acts as the sole regulatory executive body.