The National Payments Corporation of India (NPCI) has proposed a dedicated fund financed from Merchant Discount Rate (MDR) collections to support small merchants and expand digital payment infrastructure in smaller cities, as India prepares to introduce MDR on select UPI transactions from October 15.
The fund will support merchant onboarding, encourage higher UPI transaction volumes among existing small merchants and help build digital payment infrastructure across Tier 3 to Tier 6 centres. It will also support notified Central government schemes, according to NPCI's framework.
The proposal comes alongside the introduction of a 0.4% MDR on select person-to-merchant (P2M) UPI transactions above Rs 2,000. The charge will be capped at Rs 300 for transactions of Rs 75,000 and above. Consumers will not pay the MDR, while person-to-person (P2P) transactions will continue to remain free.
Also Read: Pass the buck to RBI, banks: Let the savings from digital payments fund UPI costs, not consumers
How will the dedicated fund work?
NPCI has said the fund will provide financial assistance to ecosystem players for merchant onboarding and encouraging UPI usage among existing small merchants. It will also support digital payment infrastructure in Tier 3 to Tier 6 locations, including the Northeast, Jammu & Kashmir and Ladakh.
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