The introduction of a Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions, initially slated for October 15, is expected to be deferred until January 1, 2027. This postponement aims to ensure that UPI payments remain free for merchants throughout India's crucial festival season, which typically concludes around Christmas.
Sources familiar with the discussions indicate that a final decision is imminent. The move comes in response to strong opposition from various retail traders’ associations, who had previously planned a 'No UPI Day' protest on October 2. This protest was later withdrawn after a meeting with Union Finance Minister Nirmala Sitharaman.
Understanding the Proposed UPI MDR
MDR is a fee paid by merchants to the bank and payment company that processes a digital transaction. Crucially, consumers will not be directly charged this fee. The proposed structure included a 0.40% MDR on merchant transactions exceeding ₹2,000, with a cap of ₹300. Additionally, specific categories such as bill payments, utilities, education, and fuel transactions above ₹2,000 would incur a flat fee of ₹5 per transaction.
Committee Deliberations and Exemptions
The UPI and Services Steering Committee, operating under the National Payments Corporation of India (NPCI), convened recently to discuss the timing and other clarifications regarding the proposed fee. A significant consideration is the expansion of exemptions: the committee is exploring raising the annual turnover threshold for businesses exempted from the MDR to ₹40 lakh, a substantial increase from the current monthly turnover limit of ₹1 lakh.
Wider UPI Ecosystem Developments
In a separate but related development, authorities are also considering an increase in the daily UPI transaction limit for certain categories, potentially raising it from ₹1 lakh to ₹2 lakh. The UPI platform continues to demonstrate robust growth, recording an average of 802 million transactions per day in September. Overall transaction volume surged by 22.6% year-on-year to 24.07 billion, with the total transaction value climbing 18% to ₹29.37 lakh crore.