UPI MDR Implementation Deferred Beyond Diwali
NPCI has postponed the proposed 0.4% MDR on eligible UPI merchant transactions above Rs 2,000 until after Diwali. The delay follows industry demands for relief during festive sales. Small-merchant exemptions and free person-to-person transfers remain unchanged under the framework.
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The proposed merchant discount rate (MDR) on certain Unified Payments Interface (UPI) transactions will not be introduced on the originally scheduled date of October 15, as the National Payments Corporation of India (NPCI) has postponed its implementation until after Diwali. The organisation said on Tuesday that stakeholders would be informed of the revised effective date in due course.
The decision delays the rollout of a framework announced on September 15 that seeks to introduce a 0.4% charge on eligible merchant payments exceeding Rs 2,000 when funded directly through bank accounts. The fee would be capped at Rs 300 per transaction.
The deferment follows requests from industry bodies representing retailers and distributors, who have raised concerns about introducing additional transaction costs during the festive shopping period. All India Mobile Retailers Association and the All India Consumer Products Distributors Federation urged NPCI to reconsider the timeline. Their demands included postponing the rollout, increasing the transaction threshold for small-merchant exemptions and excluding business-to-business merchant payments from the levy.
Under the proposed rules, UPI transactions of up to Rs 2,000 would continue to remain free, as would person-to-person transfers. Eligible small merchants would also be exempt from the charge. The framework further stipulates that merchants cannot recover the MDR amount by passing it on to customers.
NPCI has maintained that revenue generated through MDR would help strengthen the digital payments ecosystem. The funds are intended to support the expansion of merchant acceptance infrastructure, improve payment services and strengthen fraud prevention mechanisms.
However, the postponement means banks and payment companies will have to wait longer for the anticipated revenue from eligible transactions. The revised implementation date is expected to provide greater clarity to merchants and other participants in the UPI ecosystem, although the underlying framework remains subject to the announced timeline and applicable exemptions.
