Daijiworld Media Network – New Delhi
New Delhi, Oct 13: The rollout of Merchant Discount Rate (MDR) charges on select UPI transactions above Rs 2,000 has been deferred until after Deepavali following requests from traders to postpone the implementation during the festive shopping season.
The revised rollout is expected in the second week of November, although the final date is yet to be announced.
"Keeping in mind the festive season, the UPI and Services Steering Committee on October 13 decided that MDR on select Person-to-Merchant (P2M) UPI transactions shall be implemented immediately post Deepavali," the National Payments Corporation of India (NPCI) said in a media statement on Tuesday.
The new implementation date will be notified later, NPCI added.
The charges were earlier scheduled to come into effect on October 15. However, as the date coincided with the festive shopping season, when consumer spending typically increases, the rollout was postponed to give payment firms and consumers more time to update their systems and address concerns over introducing the charges during the festive period.
Earlier in September, the UPI Steering Committee fixed the MDR at 0.4% for transactions above Rs 2,000. MDR is the fee charged to merchants for processing digital payments. At this rate, the fee amounts to Rs 8 on a transaction of Rs 2,000 and Rs 40 on a payment of Rs 10,000 made through UPI.
Meanwhile, select sectors, including railways, telecom, insurance, fuel and agricultural inputs, will attract a flat MDR of Rs 5 on transactions above Rs 2,000.
Rationale behind UPI MDR
According to the Centre, the proposed charges are intended to help fund the infrastructure required to operate UPI, including system resilience, cyber security, fraud prevention and customer support.
The government has clarified that the charges will be borne by merchants rather than consumers and will be capped at Rs 300 for transactions of Rs 75,000 or more.
Payments between individuals, along with most everyday merchant transactions, will continue to remain free.
According to the finance ministry's September FAQs, which cite industry estimates, operating UPI costs around Rs 20,000 crore annually. The Centre has argued that government incentives alone do not provide a sustainable long-term funding model for the payment system.
However, the proposed charges have raised concerns about the additional financial burden on businesses, particularly small shops and service providers that rely heavily on digital payments.
"The idea of charging a merchant fee on UPI transactions over Rs 2,000 might add an expense for businesses, especially those like small shops or service providers who depend a lot on digital payments. These fees might help payment companies cover their costs for running the system, but we must be careful. If the fees get too high it could make merchants less willing to accept UPI. They may pass the cost on to customers by raising prices," Mukesh Pandey, founder and MD of Rupyaapaisa.com, told NDTV.
Pandey added that UPI had worked well because it was easy to use, accessible to almost everyone and inexpensive.
Echoing concerns about the potential impact on businesses and consumers, Atish Shelar, Group CEO of MOS Utility Limited, told NDTV, "Given that UPI has become a routine part of everyday commerce, especially for small businesses, any confusion around charges will directly impact customer experience. Hence, they should leverage the additional time to prepare without disrupting digital payment adoption and waiting for the final rollout date."
The postponement is expected to give merchants and payment service providers additional time to prepare for the revised fee structure while the industry awaits formal confirmation of the implementation date.