NPCI has deferred MDR on select UPI merchant transactions until immediately after Diwali, with a revised date to be notified separately
The delay gives affected merchants a reprieve from the new payment processing charges during the festive shopping season
The UPI and Services Steering Committee took the decision today, citing the festive season
The National Payments Corporation of India (NPCI) has deferred the introduction of merchant discount rate (MDR) on select UPI person-to-merchant (P2M) transactions until immediately after Diwali, pushing back the October 15 rollout.
The NPCI said its UPI and Services Steering Committee took the decision keeping the festive season in mind. The revised implementation date will be notified separately.
The announcement confirms a delay in the rollout but does not set January 1, 2027, as the new deadline, as earlier reports had suggested.
Under the proposed framework UPI MDR, merchants would be charged an MDR of 0.40% on eligible P2M UPI transactions above ₹2,000, capped at ₹300 per transaction.
The move had faced significant push back from retail traders’ associations. The committee was also reportedly considering exempting businesses with an annual turnover of up to ₹40 Lakh from the proposed fee.
The new framework marks a shift from the zero-MDR regime. Transactions up to ₹2,000, person-to-person (P2P) transfers and eligible small-merchant transactions would remain exempt.
The All India Mobile Retailers Association (AIMRA) and the All India Consumer Products Distributors Federation (AICPDF) had called for a ‘No UPI Day’ on October 2 to protest the proposed charges. They withdrew the planned protest after meeting Finance Minister Nirmala Sitharaman on September 30.
AIMRA had sought a fixed, nominal charge for digital transactions instead of the proposed 0.40% MDR. The AICPDF, meanwhile, has estimated that the fee could add ₹7,000 Cr-₹9,000 Cr in annual costs across the FMCG distribution and retail ecosystem.
Recently, the Supreme Court refused to stay the Centre’s implementation of MDR charges on select UPI transactions. However, it directed the Centre and other respondents to file their counter-affidavits within four weeks, observing that the issue was “less legal and more technical”.
Earlier this month, NPCI MD and CEO Dilip Asbe defended the proposed MDR framework, saying a market-driven economic model for UPI is necessary to fund rising cybersecurity, scalability and infrastructure costs.
Asbe said banks and payment companies would need to invest continuously in AI to strengthen security and maintain user trust.
“The ability and the tools with the hackers are really very powerful compared to what we could actually use inside,” he said, adding that AI was expensive to deploy and would require sustained investment to protect payment systems.
Meanwhile, UPI continued to see double-digit year-on-year (YoY) growth in volume and value last month, despite a marginal month-on-month (MoM) decline. UPI processed 24.07 Bn transactions worth ₹29.37 Lakh Cr in September, down 1.8% and 1.5%, respectively, from 24.51 Bn transactions worth ₹29.82 Lakh Cr in August.
On a YoY basis, transaction volume grew 23%, while transaction value rose 18%. Average daily transactions increased to 802 Mn in September from 791 Mn in August, while the average daily transaction value climbed to ₹97,913 Cr from ₹96,205 Cr.
Source: Inc42
