The proposed UPI merchant discount rate (MDR) on selected person-to-merchant transactions above Rs 2,000 has been deferred until immediately after Diwali, giving merchants and payment companies more time before the new charge takes effect.
The decision was taken by the UPI and Services Steering Committee of the National Payments Corporation of India (NPCI), according to a report by The Times of India. The committee cited the festive season for postponing the implementation. A revised date will be notified separately.
The proposed framework, approved and notified by NPCI on September 15, provides for a 0.4% charge on eligible person-to-merchant UPI transactions above Rs 2,000. The charge would be capped at Rs 300 for transactions of Rs 75,000 and above. It was originally scheduled to take effect from October 15, allowing banks, payment aggregators and other ecosystem participants a month to make operational changes.
The deferment comes days before the scheduled rollout and follows requests from trade bodies and merchant associations for implementation to be pushed to January. They had argued that introducing a new payment cost during the festive season could raise expenses for businesses at a time when retail activity and digital transactions generally increase.
The proposal marks a significant change for an ecosystem that has operated with effectively zero MDR on UPI for more than six years. MDR is the fee paid by a merchant’s bank to the bank or payment service provider handling a digital transaction. The proposed framework is intended to create a revenue stream for parts of the payments ecosystem while keeping smaller transactions outside the levy.
Transactions up to Rs 2,000 and eligible small merchants are expected to remain free under the framework. About 96% of person-to-merchant transactions were expected to remain unaffected, according to the report. The fee would therefore apply to a specified segment of larger-value merchant payments rather than to all UPI transactions.
For merchants, the immediate effect of the decision is that the proposed cost will not be introduced during the current festive trading period. For banks, payment aggregators and other participants, the additional time can be used to prepare operational systems and communicate the applicable rules before the revised start date.
The postponement also keeps the cost structure of UPI unchanged through the festive season. That matters for retailers and service providers that increasingly depend on digital payments at points of sale, although the supplied report does not establish how the eventual fee will be divided between merchants, banks, payment aggregators or other participants.
The decision does not cancel the MDR framework. It only delays its implementation until after Diwali, with the precise date still to be announced. The next formal milestone will be the notification of that revised rollout date by the relevant payments authorities.
