Technology

IIE DIGITAL DESK ; New Delhi: There is significant relief for businesses during the festive season, as Merchant Discount Rate (MDR) charges on UPI transactions above ₹2,000 will not be introduced immediately. Speculation had been building over the proposed charges, which were initially scheduled to come into effect from October 15, during the Durga Puja period. However, considering the concerns raised by traders and businesses ahead of the festive season, the implementation deadline has now been extended. The charges may be introduced after Kali Puja and Diwali, potentially in November. The National Payments Corporation of India (NPCI) announced the decision in a statement on Tuesday, October 13.

The decision is expected to provide temporary relief to merchants who rely heavily on Unified Payments Interface (UPI) payments during the festive season, when consumer spending typically increases. With Durga Puja, Kali Puja and Diwali being important periods for retail businesses, traders had expressed concerns about introducing an additional transaction cost at a time when digital payments are widely used for purchases.

Why Has the Implementation of UPI Charges Been Delayed?

Under the earlier decision, MDR charges were scheduled to become applicable from October 15 to certain person-to-merchant (P2M) UPI transactions exceeding ₹2,000. However, business representatives had requested that the implementation be postponed, citing the ongoing festive season and the potential financial burden on merchants.

Following these requests, the UPI and Services Steering Committee held a meeting on Tuesday to review the proposed timeline. After considering the concerns raised by businesses, the committee decided to defer the implementation until after the Diwali festivities. The exact date on which the revised charges will come into effect has not yet been announced. NPCI is expected to issue a separate notification confirming the implementation date.

The postponement means that merchants will receive additional time before the proposed charges are introduced. For businesses that process a large volume of digital payments during the festive season, the extension could help avoid an immediate increase in transaction-related expenses.

What Was the Earlier Decision on MDR Charges?

Last month, the UPI governing committee had decided to introduce a Merchant Discount Rate of 0.4 per cent on eligible UPI transactions exceeding ₹2,000. The proposed charge applies to specified person-to-merchant transactions, meaning payments made by customers to businesses through UPI.

Under the proposed arrangement, merchants would have to pay the applicable MDR charge on eligible transactions. For example, if a customer makes a payment of ₹10,000 to a merchant through UPI, a charge of 0.4 per cent would amount to ₹40. The actual amount payable would depend on the applicable rules and the scope of the final policy.

The proposed charges have drawn attention because UPI has become one of India's most widely used digital payment methods, particularly among small retailers, local shops and service providers. Any additional cost associated with receiving digital payments could have an impact on businesses that handle a high volume of transactions.

The immediate implementation of the proposed MDR charges has been deferred, offering relief to merchants ahead of the major festivals. However, the postponement does not mean that the proposal has been withdrawn altogether. Businesses and consumers will have to wait for the official notification to know the final implementation date and the precise details of the revised rules.