Policy of ‘No Fee’ on these UPI transactions for consumers to continue as Union Government launches this incentive scheme

UPI transactions, which are valued at less than Rs 2,000 and are made to small merchants, the acquiring bank and other involved stakeholders will be eligible for an aggregate incentive at the rate of 0.15% per transaction value.
According to the circular, “the scheme, which has an outlay of around Rs 1,500 crore for 2024-25, will have the government pay incentive to the acquiring bank (Merchant's bank) and thereafter shared among other stakeholders, namely issuer bank (Customer's Bank), Payment Service Provider Bank (facilitates onboarding of customers on UPI apps and API integrations), and App Providers (TPAPs).

As per NPCI (National Payments Corporation of India), P2PM merchants, or small merchants, are those who have a projected inward UPI transaction value of less than or equal to Rs 50,000 per month.

Notably, MDR is a fee charged by banks and other payment processing gateways from merchants in lieu of facilitating their transactions. This is generally charged as a percentage of the transaction amount.

“As per RBI, MDR up to 0.90% of transaction value is applicable across all card networks. (for debit cards). As per NPCI, MDR up to 0.30% of the transaction value is applicable for UPI P2M transactions. Since January 2020, to promote digital transactions, MDR was made zero for RuPay Debit Cards and BHIM-UPI transactions through amendments in Section 10A of the Payments and Settlement Systems Act, 2007 and Section 269SU of the Income-tax Act, 1961," the circular added.

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How will this benefit the