UPI MDR Charges After Diwali: NPCI Defers Oct 15 Rollout, Merchants Await New Date; Check Exemptions

Merchants across India are awaiting a fresh implementation date from the National Payments Corporation of India (NPCI) for the proposed Merchant Discount Rate (MDR) on select Unified Payments Interface (UPI) transactions. The charges were originally scheduled to take effect on October 15 but were deferred to avoid adding to merchants' costs during the festive season.

With Diwali celebrations over, NPCI is yet to announce the revised date. Its UPI and Services Steering Committee had said the charges would be implemented immediately after Diwali, with the exact date to be notified separately. The proposed fee structure, however, remains in place.

Under the framework, eligible person-to-merchant (P2M) UPI transactions above Rs 2,000 will attract an MDR of 0.4 per cent. The charge will be capped at Rs 300 for transactions of Rs 75,000 and above.

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For example, a merchant receiving an eligible payment of Rs 1 lakh would ordinarily incur an MDR of Rs 400. However, the cap would limit the charge to Rs 300.

UPI MDR Charges: Which Transactions Will Attract Fees?

Different rates have been proposed for certain categories of merchant transactions above Rs 2,000:

- Railways, telecom, insurance and fuel: A flat MDR of Rs 5 per transaction.

- Capital markets: A concessional MDR of 0.02 per cent, capped at Rs 300. This includes payments relating to mutual funds, securities, stockbrokers and dealers.

- Other eligible merchant transactions: An MDR of 0.4 per cent, subject to the Rs 300 cap for transactions of Rs 75,000 and above.

The framework also covers agricultural inputs and certain other specified payment categories.

Will Customers Have To Pay Extra For UPI Transactions?

No. The MDR is a merchant-side charge and is not intended to be collected separately from customers. The Finance Ministry has said banks have been advised to ensure that merchants do not pass the charge on to customers. UPI application providers have also been prohibited from imposing platform fees or hidden charges.

Person-to-person (P2P) UPI transfers will continue to remain free, irrespective of the amount. Merchant payments of up to Rs 2,000 will also remain outside the MDR framework.

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Small merchants receiving up to Rs 1 lakh per month through UPI QR codes under the P2PM category will continue to be exempt from MDR. According to the Finance Ministry, around 96 per cent of merchant transactions will remain unaffected by the proposed charges.

The MDR is not a tax collected by the government or NPCI. The amount will be distributed among participants in the digital payment ecosystem, including banks and payment service providers.

For now, merchants are waiting for NPCI to announce the revised implementation date and operational details.