New Delhi: The proposed merchant fee of 0.4 per cent on Unified Payments Interface (UPI) transactions exceeding Rs 2,000 will not be passed on to consumers, government sources stated on Thursday.

Earlier in the day, National Payments Corporation of India (NPCI) Managing Director and CEO Dilip Asbe indicated that approximately 10 per cent of the total value of UPI transactions could encounter the risk of charges being transferred to consumers under the merchant discount rate (MDR).

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However, sources emphasised that not a "single penny" from the proposed MDR would enter government coffers.

The collected amount will instead be distributed among banking institutions and other participating entities within the UPI ecosystem, they added.

The MDR levy of 0.4 per cent on UPI payments over Rs 2,000 will not affect consumers. Commercial banks and the Indian Banks' Association (IBA) will actively address misunderstandings regarding MDR charges and their potential consequences for users, sources noted.

The sources further dismissed concerns that merchant fees on UPI would drive consumers back to using cash, describing such fears as misplaced.

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Officials also expressed optimism that the Goods and Services Tax (GST) Council will reconsider the 18 per cent GST currently levied on merchant fees for UPI transactions above Rs 2,000.

"IBA will soon run an awareness campaign to dispel various misconceptions and rumours about levy of 0.4 per cent MDR on UPI transactions above Rs 2,000," the sources said.

PTI