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The UPI and Services Steering Committee has postponed the implementation of Merchant Discount Rate (MDR) on select person-to-merchant transactions, citing the festive season. The revised date will be announced separately, while person-to-person payments and eligible small merchants will continue to enjoy zero-MDR benefits.
The National Payments Corporation of India (NPCI) has deferred the implementation of Merchant Discount Rate (MDR) on select Unified Payments Interface (UPI) merchant transactions until after Diwali, taking into account the ongoing festive season. The exact date of implementation will be announced separately, NPCI said in an official statement on Tuesday.
The decision was taken by the UPI and Services Steering Committee, which considered the festive season while finalising the timeline for introducing charges on specified person-to-merchant (P2M) transactions.
“Keeping in mind the festive season, Merchant Discount Rate (MDR) on select Person-to-Merchant (P2M) UPI transactions shall be implemented immediately post Diwali at a date to be notified separately,” NPCI said.
MDR is the fee paid by merchants to banks and payment processors for accepting digital payments. The proposed framework applies charges only to specified merchant transactions, while several categories of UPI payments will continue to remain free.
What are the proposed UPI charges?
Under the framework announced earlier, an MDR of 0.4 per cent will apply to specified merchant transactions above Rs 2,000, with a cap of Rs 300 for transactions exceeding Rs 75,000. Transactions of up to Rs 2,000 will remain free.
More from BusinessFor specified essential sectors, including railways, telecommunications, insurance, fuel, utilities and education, a flat MDR of Rs 5 will apply to transactions above Rs 2,000.
The framework also protects small merchants collecting up to Rs 1 lakh per month through existing QR codes, who will continue to be covered under the zero-MDR framework.
Person-to-person (P2P) UPI transfers will remain free, irrespective of the amount transferred. 96 per cent of UPI merchant transactions remain unaffected
The Finance Ministry had earlier clarified that the proposed MDR framework would not affect person-to-person transactions or merchant payments of up to Rs 2,000. Eligible small merchants covered under the zero-MDR framework will also continue to receive payments without MDR charges.
“Consequently, approximately 96 per cent of all P2M transactions will remain unaffected,” the Ministry had said in its official statement.
According to the Ministry, the charges collected under the framework will be distributed among participants in the digital payments ecosystem, including banks and payment application providers, to support the operation and continued expansion of UPI.
The Ministry has also clarified that MDR is neither a tax nor a charge collected by the government or NPCI.
With implementation deferred until after Diwali, the existing zero-MDR provisions will continue to apply until the revised timeline takes effect. The framework is intended to cover only specified merchant transactions, leaving the majority of UPI payments unaffected.
