New Delhi: In a major relief for retailers and business owners amid the ongoing festive season, the National Payments Corporation of India (NPCI) has decided to defer the implementation of the proposed Merchant Discount Rate (MDR) on select Unified Payments Interface (UPI) transactions. Originally scheduled to come into effect on October 15, the rollout has now been pushed back until after Diwali, with a revised date expected to be announced soon.
Under the proposed UPI MDR framework, which was announced by the NPCI in mid-September, a 0.4 per cent fee was set to be levied on person-to-merchant (P2M) transactions exceeding Rs 2,000, capped at a maximum of Rs 300 per transaction. However, standard person-to-person (P2P) transfers and merchant payments under Rs 2,000 were slated to remain completely free of charge.
The decision to postpone the implementation was taken by the UPI and Services Steering Committee following intense pushback from various merchant associations, trade bodies, and fintech platforms. Retail representatives had vehemently argued that introducing an additional cost during the peak festive sales period could significantly impact their profit margins. There were widespread concerns that the added financial burden might eventually be passed on to the end consumer, potentially dampening the festive shopping spirit.
Organisations such as the All India Mobile Retailers Association (AIMRA) had actively campaigned against the new charges, stating that a 0.4 per cent cut on high-ticket items like smartphones and consumer electronics would disproportionately affect small dealers operating on narrow margins. Apart from seeking a delay, merchant bodies have also requested the government and NPCI to consider a higher exemption threshold and completely exempt merchant-to-merchant transactions from the MDR net.
The NPCI has maintained that the revenue generated from MDR is crucial for the long-term sustainability of India’s digital payments ecosystem. The funds are intended to support the expansion of the merchant network, maintain robust transaction-processing infrastructure, and enhance fraud prevention mechanisms.
For now, the deferment provides a temporary breathing space for the retail sector during its most critical sales period of the year. The payment ecosystem will closely watch for further operational guidance from the NPCI regarding the final rollout date.