Festive cheer: UPI MDR may be deferred till next year, says report

The introduction of merchant discount rates (MDR) on Unified Payments Interface (UPI) transactions may be postponed to January 1, 2027, from the initially proposed date of October 15. This delay would keep UPI payments free for merchants during the festival season, which lasts until Christmas.

According to a report in Business Standard that cited sources familiar with the matter, the final decision is expected in the coming days. The move comes amid opposition from retail traders’ associations. The MDR is likely to be implemented after the festival period, the report added.

The UPI and Services Steering Committee, led by the National Payments Corporation of India (NPCI), met on Wednesday to discuss the timing of the proposed fee and other related clarifications.

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Retail traders’ associations had planned a ‘No UPI Day’ on October 2 to protest against the MDR but withdrew the call after meeting Union Finance Minister Nirmala Sitharaman last month.

The committee is considering exempting businesses with an annual turnover of up to ₹40 lakh from the fee, expanding the exemption from the current framework where businesses with a monthly turnover of up to ₹1 lakh were spared, the report added.

MDR is a fee paid by merchants to the bank and payment company processing a digital transaction. Consumers will not be charged the MDR. A 0.40% MDR would apply to merchant transactions above ₹2,000 or peer-to-merchant transactions, subject to a cap of ₹300. Certain categories, including bill payments, utilities, education, and fuel, would attract a flat ₹5 fee per transaction above ₹2,000.

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Separately, authorities are considering raising the daily UPI transaction limit for certain categories to ₹2 lakh from ₹1 lakh.

UPI recorded an average of 802 million transactions per day in September. Transaction volume rose 22.6% year-on-year to 24.07 billion, while transaction value increased 18% to ₹29.37 lakh crore.