UPI MDR charges may not take effect on October 15 after trader organisations asked Finance Minister Nirmala Sitharaman to defer the proposed framework until January 1, 2027, citing confusion among merchants and the approaching festive season. The organisations have submitted a written memorandum to the Finance Minister, sources told NDTV.
The proposed Merchant Discount Rate would apply only to select person-to-merchant UPI transactions above Rs 2,000. Under the framework, an MDR of 0.4 per cent would be levied on eligible payments, with transactions of Rs 75,000 and above subject to a maximum charge of Rs 300 per transaction.
For example, a merchant receiving an applicable UPI payment of Rs 3,000 would pay Rs 12 as MDR. A transaction of Rs 50,000 would attract a charge of Rs 200, while payments of Rs 75,000 or more would be subject to the Rs 300 cap.
The proposed charges would not cover all UPI payments. More than 95 per cent of UPI person-to-merchant transactions are expected to remain outside the MDR framework, according to the background provided in the report. Small merchants operating under the person-to-person merchant model would continue to receive zero MDR.
Certain categories would carry separate charges. Railway payments, telecom services, insurance and fuel transactions above Rs 2,000 would attract a flat MDR of Rs 5. Capital-market payments, including transactions 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 structure is aimed at merchant-side transactions and would not introduce a monthly quota or cap on free UPI usage for consumers. Banks have also been advised to ensure that merchants do not pass the MDR cost on to customers.
Trader organisations are seeking the delay because merchants need more time to understand which payments would attract charges and how the revised system would operate. Their request comes before the festive season, when digital payment activity typically rises and retailers handle higher transaction volumes.
The organisations have also decided to begin an awareness campaign across the country to explain the proposed MDR framework to traders. The campaign is intended to address uncertainty among merchants before the revised rules are implemented.
The framework provides for 5 per cent of total MDR collections to be allocated to a dedicated fund supporting UPI acceptance among small merchants. The collected MDR would also be shared among different participants in the UPI ecosystem and is expected to support UPI expansion, cybersecurity and innovation.
The proposed rates are still expected to remain lower than charges generally applicable to cards and digital wallets. The government’s response to the traders’ request and any decision on the October 15 implementation date will determine whether the framework is introduced as scheduled or deferred to January 1, 2027.
