New Delhi: The proposed merchant discount rate (MDR) on select Unified Payments Interface (UPI) transactions exceeding Rs 2,000 has been postponed until after Diwali, with the National Payments Corporation of India (NPCI) set to announce a revised implementation date separately.

The levy, initially scheduled to take effect from October 15, was deferred in view of the festive season, when digital payments typically rise as consumers increase spending. The decision was taken by the UPI and Services Steering Committee on Tuesday.

Under the proposed framework, eligible person-to-merchant (P2M) transactions above Rs 2,000 will attract an MDR of 0.4 per cent. The charge will be borne by merchants rather than customers, with the fee capped at Rs 300 for transactions worth Rs 75,000 or more.

Which Transactions Will Attract Charges?

The proposed framework keeps person-to-person (P2P) transfers free, irrespective of the amount. Merchant payments up to Rs 2,000 and eligible transactions covered under the zero-MDR framework for small businesses will also remain exempt.

Certain essential services, including railways, telecommunications, fuel and insurance, are proposed to attract a flat fee of Rs 5 on transactions above Rs 2,000. Payments related to capital markets, including mutual funds and stockbroking, will carry a lower MDR of 0.02 per cent, subject to a cap of Rs 300 per transaction.

NPCI has said the proposed charges are intended to create a sustainable revenue model for the digital payments ecosystem, with collections shared among participating banks and payment service providers.

Traders Welcome The Decision

The Confederation of All India Traders (CAIT) welcomed the postponement, describing it as a timely move during the festive and wedding season. The traders' body said additional transaction costs could affect businesses operating on narrow profit margins and potentially discourage the adoption of digital payments.

The deferment follows discussions between trade representatives and Union Finance Minister Nirmala Sitharaman on September 30, during which traders raised concerns about the proposed levy.

Although the implementation has been postponed, the proposed MDR structure remains unchanged for now. NPCI is expected to notify the revised date after Diwali.