UPI MDR on loan repayments: What charge applies to EMIs and who bears it? Here's what borrowers need to know

Starting October 15, a new charge will apply to certain UPI transactions related to debt collection. Specifically, UPI transactions exceeding ₹2,000 for purposes such as loan repayments and the collection of Equated Monthly Installments (EMIs) will incur a ₹5 Merchant Discount Rate (MDR).

It is important for ordinary borrowers to understand who bears this charge. The good news is that this ₹5 MDR will be applied on the merchant side, meaning the entity collecting the debt, rather than directly on the borrower. This measure aims to clarify the cost structure for digital debt collection via UPI.

This new charge will be applicable to various forms of debt collection, including standard EMIs, transactions made through UPI AutoPay features, and other credit-linked UPI payments. Borrowers should be aware of this change, although it does not directly impact the amount they pay. The focus remains on the operational costs for lenders and financial institutions utilizing UPI for large-value debt collection.

What to watch: How this charge might influence the adoption and structuring of UPI-based loan repayments by lenders.

Editor's note: The article correctly interprets the financial details provided in the summary.

This article is AI-generated and fact-gated. Original reporting: Livemint Money