The proposed UPI charges on select high-value merchant transactions could be delayed from October 15 to January 1, 2027 after trader organisations wrote to Finance Minister Nirmala Sitharaman seeking more time to understand the framework before the festive season.
Trader bodies have submitted a written memorandum to the Finance Minister, saying merchants remain unclear about how the proposed Merchant Discount Rate (MDR) will affect their businesses, sources told NDTV Business. They have also announced a nationwide awareness campaign to explain the proposed rules to traders.
Under the proposed framework, an MDR of 0.4 per cent would apply to select person-to-merchant (P2M) UPI transactions above Rs 2,000. The charge would be capped at Rs 300 for transactions of Rs 75,000 and above.
For example, a merchant receiving an applicable UPI payment of Rs 3,000 would pay Rs 12 as MDR, while a Rs 50,000 transaction would attract a charge of Rs 200. Transactions of Rs 75,000 or more would carry a fixed charge of Rs 300 under the proposed cap.
The framework would not cover all UPI payments. More than 95 per cent of UPI P2M transactions are expected to remain outside the MDR structure, according to the background provided in the report. Small merchants operating under the person-to-person merchant (P2PM) model would continue to receive zero MDR.
Certain categories, including railway payments, telecom services, insurance and fuel, would attract a flat MDR of Rs 5 on UPI transactions above Rs 2,000. Capital-market payments involving mutual funds, securities, stockbrokers and dealers would attract an MDR of 0.02 per cent, subject to a maximum of Rs 300 per transaction.
The proposed charges would apply to merchants rather than consumers. There would be no monthly quota or cap on free UPI usage for customers. Banks have also been advised to ensure that merchants do not pass the MDR cost on to customers.
The request for postponement comes before the festive season, when digital payments typically record higher activity. Trader organisations have said the additional time would allow merchants to understand the new structure and prepare for its implementation without entering the peak shopping period with unresolved questions about transaction costs.
The proposed framework also provides for 5 per cent of total MDR collections to be allocated to a dedicated fund for expanding UPI acceptance among small merchants. The collections would be shared among different participants in the UPI ecosystem and are expected to support UPI expansion, cybersecurity and innovation.
The revised rates are still expected to remain lower than charges generally applicable to cards and digital wallets. The Finance Ministry’s response to the traders’ request and any decision on whether to shift the proposed October 15 implementation date were not specified in the report.
