Will customers have to pay for UPI?
Will sending money to friends or relatives become chargeable?
Will hotel and airline payments attract additional charges?
What about electricity bills, RTGS, NEFT and direct bank transfers?
This article explains the new UPI rules in simple language.What is UPI MDR?MDR means Merchant Discount Rate.It is a fee associated with processing certain digital payments made to merchants. Under the new framework, specified merchant UPI transactions above ₹2,000 can attract MDR.However, MDR should not be confused with a general UPI charge on customers.The important distinction is between P2P — Person to Personand P2M — Person to Merchant.
1. Sending money to a friend or relative If you use BHIM, UPI or another UPI application to send money to another individual, it is a P2P transaction.For example:- ₹5,000 to a friend- ₹50,000 to a relative- ₹1,00,000 to a family member- ₹2,00,000 to another individual These remain free under the new UPI MDR framework.Person → Person = No UPI MDR Therefore, people do not need to worry that sending a large amount to a family member through BHIM will suddenly attract 0.4%.
2. Paying a shop or business through UPIA payment to a merchant is different.For qualifying normal merchant transactions above ₹2,000, the announced standard MDR is:0.4%, subject to a maximum of ₹300 per transaction.Examples:.Payment| 0.4%| Maximum MDR₹5,000| ₹20| ₹20₹25,000| ₹100| ₹100₹50,000| ₹200| ₹200₹75,000| ₹300| ₹300₹1,00,000| ₹400| ₹300₹5,00,000| ₹2,000| ₹300The ₹300 maximum is therefore important for high-value transactions.
3. Does the customer pay the MDR? No.The MDR is a merchant-side payment-processing charge under the announced framework.Therefore, if your hotel bill is ₹30,000, the fact that the merchant may incur MDR does not automatically mean that the customer should be charged:₹30,000 + ₹120 UPI MDR.The government has also said UPI providers cannot impose hidden/platform charges on customers and banks have been advised to ensure merchants do not pass MDR on to customers.However, businesses may have separate convenience or booking fees under their own terms. These should not be confused with MDR.
4. What about hotel payments?Suppose you stay at a hotel and your bill is:₹30,000If the hotel falls under the standard merchant category, the MDR calculation would be:₹30,000 × 0.4% = ₹120But ₹120 is the merchant-side MDR calculation, not automatically an additional ₹120 payable by the customer.Before paying, however, check the final checkout amount because a hotel or booking platform may have its own:- Convenience fee- Booking fee- Service fee- Payment-processing fee These are separate from UPI MDR.
5. What about airline tickets?Suppose your air ticket costs:₹30,0000.4% = ₹120For:₹40,0000.4% = ₹160Again, these figures relate to the merchant-side MDR under the standard category.They do not mean that a passenger automatically pays an additional ₹120 or ₹160 merely because UPI is used.Airlines and travel portals can independently charge convenience or booking fees, so always compare the final payable amount.
6. What about BRPL electricity bills?Electricity payments are treated differently from ordinary merchants. For qualifying utility payments above ₹2,000, the announced special MDR is:₹5 per transactionTherefore, if you pay a:₹20,000 BRPL electricity bill the special utility MDR is ₹5, rather than applying the standard 0.4% rate. Again, this is not automatically an additional ₹5 that the consumer must pay.
7. What about RTGS and NEFT?This is an important point.RTGS and NEFT are NOT UPI.Therefore, the new UPI MDR framework does not automatically apply to:- RTGS- NEFT- Direct bank transfer- Internet banking transferFor example, suppose you have to pay a business:₹5,00,000and the business gives you its bank account details.You can make a direct bank transfer through the applicable banking channel.That payment is not a UPI merchant transaction, so the new UPI MDR does not apply simply because the amount is ₹5 lakh.Banks can, however, have their own applicable service charges depending on the account and banking arrangement.
8. Can businesses avoid UPI MDR by asking customers for bank transfers?
For businesses receiving large-value payments, direct bank transfer is a separate payment rail from UPI.Therefore, businesses may offer customers options such as:- NEFT- RTGS- Direct bank transfer- Cheque- UPIThe applicable banking charges and business policies should be checked separately.For high-value purchases, businesses should also maintain proper invoices and accounting records regardless of the payment method.
9. Should customers split a large UPI payment?
Suppose a hotel bill is ₹30,000..A customer might think:“Why not make fifteen payments of ₹2,000?”This is not a good strategy for avoiding MDR.The ₹2,000 threshold is part of the merchant-payment framework, and deliberately splitting transactions simply to circumvent applicable charges is not something customers or businesses should rely upon.The correct approach is to use the payment method that offers the lowest legitimate final cost.
10. How can consumers save money?
The most useful way to save money is not to worry about the merchant's MDR, because it is not supposed to be added to your bill as a UPI charge.Instead, compare the final price.For an airline ticket, compare: Airline website/app + UPI versus Airline website/app + card/net bankingversusTravel portal For a hotel, compare: Direct hotel booking versus Hotel payment link versus Travel portal versus Direct bank transfer, if offered The lowest final payable amount is what matters.
Quick Reference Table Situation UPI MDR?
Customer's position Send ₹50,000 to friend No ₹0 UPI charge Send ₹1 lakh to relative No ₹0 UPI charge. Pay normal merchant ₹5,000 Merchant MDR may apply MDR not automatically added to bill Hotel ₹30,000| Merchant MDR may apply Check final bill/convenience fee Airline ₹40,000 Merchant MDR may apply. Check final booking amount BRPL ₹20,000| Special utility treatment| MDR is merchant/biller-sideNEFT ₹5 lakh| UPI MDR does not apply Bank rules apply RTGS ₹5 lakh UPI MDR does not apply. Bank rules apply Direct bank transfer UPI MDR does not apply Bank rules apply Frequently Asked Questions UPI going to become chargeable for everyone? No. The new framework is primarily concerned with merchant-side MDR for specified transactions. P2P UPI transactions remain free.
Will I pay 0.4% when sending money to my brother?
No. A genuine person-to-person UPI payment remains free. If I pay ₹1 lakh to a hotel by UPI, will I pay ₹400 extra?Not automatically. The 0.4% is the merchant-side MDR calculation and is subject to the ₹300 cap for the standard category. It should not simply be added to the customer's bill as UPI MDR.
Can I use RTGS instead of UPI?
Yes, if the recipient provides bank details and accepts RTGS. RTGS is separate from UPI.Can I use NEFT instead?Yes. NEFT is also separate from the UPI MDR framework.Will my ₹20,000 electricity bill attract 0.4% MDR?The announced framework provides a special ₹5 MDR for qualifying utility payments above ₹2,000, rather than the standard 0.4% rate.
Is BHIM going to charge me for sending money?
P2P UPI transactions remain free under the announced MDR framework. Any separate bank-specific service limitation or charge would be a different matter.
Conclusion The biggest misconception about the new UPI rules is that “UPI will now cost 0.4%.”That is not an accurate description.The more accurate picture is:P2P UPIPerson → Person = Free P2M UPI Person → Merchant = MDR may apply to qualifying transactions RTGS / NEFT Separate from UPI MDR Hotel and Airline Merchant-side MDR may apply, but customers should not automatically be charged MDR separately. Electricity/Utilities Special MDR treatment applies For consumers, the best practice is simple: look at the final amount you are being asked to pay and compare legitimate payment options. For businesses, particularly high-value businesses such as jewellery stores, understanding the applicable merchant category, MDR, transaction cap and payment-provider terms will become increasingly.
-- Extract from AI
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