The implementation of the Merchant Discount Rate (MDR) on specific Unified Payments Interface (UPI) transactions has been postponed until after Diwali, as confirmed by the National Payments Corporation of India (NPCI) on Tuesday. This decision aligns with earlier reports suggesting that the rollout could be delayed to minimise disruption during the festive shopping period.
The UPI and Services Steering Committee reached this conclusion, indicating that the MDR on selected person-to-merchant (P2M) transactions will be enforced immediately following Diwali. The specific date for this implementation will be communicated separately, as stated in an NPCI release dated October 13.
According to the NPCI, the committee acknowledged the importance of the festive season in its decision. The release noted, “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.”
Concerns Over Merchant and Consumer Impact
The decision to delay the MDR rollout follows reports that the NPCI was considering requests from various merchant organisations, fintech companies, and payment firms advocating for a postponement of the proposed charges. Initially, these charges were scheduled to take effect from October 15.
A report from Moneycontrol indicated that the NPCI was contemplating a delay of the implementation until January 2027, amid rising concerns regarding the potential impact on both merchants and consumers during the festive shopping season. This postponement aims to alleviate confusion surrounding the proposed charges, including which transactions would incur the MDR and whether varying rates would apply across different transaction categories.
The proposed framework includes a 0.4 per cent MDR on specific UPI transactions exceeding Rs 2,000. For instance, a transaction amounting to Rs 10,000 would incur a fee of Rs 40. The MDR is essentially a fee that merchants pay for accepting digital payments, which can significantly influence the cost of processing payments for businesses.
Significance of the Festive Season for Retailers
The festive season is a critical period for retailers and online sellers, characterised by a surge in transaction volumes as consumers engage in shopping for electronics, travel, and various other purchases. The postponement of the MDR gives the industry additional time to prepare before the charges come into effect, although the revised implementation date remains to be announced.
The NPCI has not yet clarified the specific date for the introduction of these charges or provided further details regarding the transactions that will be affected by this decision in its October 13 release. The committee has only mentioned that the MDR on select P2M UPI transactions will be implemented immediately after Diwali.
Further clarity on the timeline and specifics of the transactions covered is anticipated once the date is formally notified. Stakeholders in the industry are awaiting this information, which will be vital for their operational planning during the busy festive period.
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