New Delhi: The proposed Merchant Discount Rate (MDR) of 0.4 per cent on select Unified Payments Interface (UPI) transactions has been deferred, with the National Payments Corporation of India (NPCI) saying the revised implementation date will be announced after Diwali.
According to an NPCI circular issued last month, the MDR was scheduled to be introduced from October 15 on person-to-merchant (P2M) UPI transactions exceeding Rs 2,000.
In a statement on Tuesday, NPCI said the UPI and Services Steering Committee had decided to postpone the rollout, citing the festive season.
“UPI and Services Steering Committee today decided that, keeping in mind the festive season, Merchant Discount Rate (MDR) on select Person-to-Merchant (P2M) UPI transactions shall be implemented immediately post Diwali on a date to be notified separately,” NPCI said.
The MDR is payable by merchants, not consumers. It is capped at Rs 300 for transactions of Rs 75,000 or more.
The decision to defer the rollout comes amid Opposition allegations that the proposed levy would amount to a tax and burden consumers.
As per the September 15 circular, person-to-person payments and the vast majority of everyday merchant transactions were to remain free.
Essential services, including railways, telecom, fuel and insurance, were to attract a flat fee of Rs 5 per transaction above Rs 2,000. Capital market transactions, including mutual fund and stockbroking payments, were to attract a lower MDR of 0.02 per cent, also capped at Rs 300.
NPCI, which operates the UPI platform, proposed the levy on select transactions to establish a sustainable revenue framework for the digital payments ecosystem.
According to NPCI, the amount collected would be distributed among banks and other entities in the UPI ecosystem. Of the MDR collected, 40 per cent would go to customers’ banks, 30 per cent to payment gateways, 20 per cent to the UPI app and the remaining 10 per cent to the sponsoring bank of the UPI app.
Welcoming the deferment, the Confederation of All India Traders (CAIT) described the decision as “timely and pragmatic”, particularly during the festive and wedding season, when millions of traders and micro, small and medium enterprises (MSMEs) depend on higher business volumes.
“Additional transaction costs could have placed an avoidable burden on merchants operating on thin margins and discouraged the wider acceptance of digital payments,” CAIT said.
The trade body said the decision followed a meeting on September 30, when a delegation of around 20 trade leaders met Finance Minister Nirmala Sitharaman and highlighted the implications of the proposed 0.4 per cent MDR on UPI transactions above Rs 2,000.