New Delhi: The National Payments Corporation of India (NPCI) has postponed the implementation of a 0.4% merchant discount rate (MDR) on select Unified Payments Interface (UPI) transactions above ₹2,000, just two days before the scheduled rollout.
In a statement issued on Tuesday, NPCI said the UPI and Services Steering Committee had decided to defer the charges until after Diwali, considering the festive season. A fresh implementation date will be announced separately.
The decision follows a circular issued in September that scheduled the levy to take effect on October 15. The proposed charge applies to select person-to-merchant (P2M) transactions made through UPI platforms, including Paytm, PhonePe and BHIM. NPCI had clarified that the fee would be paid by merchants rather than consumers, with a maximum cap of ₹300 for transactions of ₹75,000 or more.
The proposal had faced criticism from trade bodies and Opposition parties, which expressed concerns that additional transaction costs could encourage merchants to pass on the charges to customers or shift towards cash payments.
Under the September circular, person-to-person (P2P) UPI transactions would remain free. For payments involving essential services such as railways, telecommunications, fuel and insurance, the proposed MDR was capped at a flat ₹5 per transaction for payments exceeding ₹2,000.
NPCI also issued frequently asked questions to clarify the charges applicable to fuel purchases. According to the guidance, UPI payments exceeding ₹2,000 at petrol stations would attract a flat ₹5 fee, while transactions below ₹2,000 would continue to carry zero MDR.
India SME Forum president Vinod Kumar welcomed the postponement, describing it as a timely decision that would help protect micro, small and medium enterprises (MSMEs) during the festive period.
Citing a survey of 7,497 enterprises, Kumar said more than 97% of respondents reported that UPI had helped increase sales or prevent customer loss, while nearly 93% said it had improved cash flow or payment collections.
The survey also highlighted concerns about the potential impact of additional charges. Nearly 48% of respondents said they would incorporate the proposed fees into the prices of their products or services, while almost 32% indicated they would encourage customers to pay in cash.
The deferment provides temporary relief to merchants as businesses prepare for the festive demand period. However, the impact of the proposed MDR on digital payments and small businesses will depend on the revised implementation date and the final arrangements announced by NPCI.
