NPCI Asserts UPI Charges Cannot Be Passed to Customers in Supreme Court
The NPCI has clarified that merchants are prohibited from transferring UPI transaction charges to customers, emphasizing the need for a sustainable MDR framework.
NPCI states that 96% of person-to-merchant transactions will remain free from charges.
Merchants cannot pass on the Merchant Discount Rate (MDR) to customers, as per NPCI's directive.
The revised MDR framework is aimed at ensuring the long-term sustainability of the UPI ecosystem.
In a significant development, the National Payments Corporation of India (NPCI) has informed the Supreme Court that merchants are not allowed to pass on UPI transaction charges to customers. This statement comes in response to a petition challenging the revised Merchant Discount Rate (MDR) framework, which imposes charges on transactions exceeding ₹2,000. The NPCI emphasized that this directive is crucial for maintaining the integrity of the UPI ecosystem.
The Supreme Court's inquiry into the NPCI's decision follows concerns raised about the amendment to the Payment and Settlement Systems Act, 2007, which introduced the new MDR framework. NPCI's affidavit, submitted on November 3, argues that the majority of person-to-merchant transactions will remain unaffected, with only about 4% of transactions exceeding the ₹2,000 threshold subject to the new charges.
NPCI has clarified that the MDR, capped at 0.4%, is applicable only to a small fraction of high-value transactions, asserting that this narrow application minimizes the potential for merchants to raise prices across their customer base. The organization also noted that person-to-person transactions and those involving small merchants would continue to be exempt from these charges, preserving the free nature of most UPI transactions.
The implications of this framework are significant for the UPI ecosystem and its users. NPCI has indicated that the revenue generated from the MDR will be used to enhance payment infrastructure, cybersecurity, and fraud prevention measures. This approach aims to ensure that the UPI system remains robust and capable of handling the billions of transactions processed monthly.
Looking ahead, NPCI has postponed the implementation of the revised MDR framework, initially set for October 15. The organization maintains that this framework is essential for the long-term viability of UPI, allowing for necessary investments in technology and infrastructure while protecting small merchants and consumers from undue financial burdens.
