New UPI Charges May Be Delayed. Traders Write To Finance Minister, Seek Festive Season Reprieve

The proposed Merchant Discount Rate (MDR) on select UPI transactions has run into resistance from trader organisations, which have now approached Finance Minister Nirmala Sitharaman seeking more time before the new rules take effect.

Trader bodies have submitted a written memorandum to the Finance Minister, saying there is still confusion among merchants about the proposed UPI charges, sources told NDTV. They have asked the government to defer the implementation date from October 15 to January 1, 2027. The demand comes just ahead of the festive season, when digital payments typically see higher activity.

Under the proposed framework, an MDR of 0.4 per cent will apply to select person-to-merchant (P2M) UPI transactions above Rs 2,000. For transactions of Rs 75,000 and above, the MDR will be capped at Rs 300 per transaction.

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This means a merchant receiving a UPI payment of Rs 3,000 in an applicable category would pay Rs 12 as MDR. On a Rs 50,000 transaction, the charge would be Rs 200. For payments of Rs 75,000 or more, the charge would be fixed at Rs 300.

The trader organisations want the government to push back the rollout so that merchants get more time to understand how the new system will work.

They have also decided to launch an awareness campaign across the country to explain the proposed MDR framework to traders.

Which UPI Transactions Will Face MDR?

The proposed charges will not apply to all UPI payments. More than 95 per cent of UPI P2M transactions are expected to remain outside the MDR framework, according to the background provided. Small merchants operating under the P2PM model will continue to get zero MDR.

Select categories, including railway payments, telecom services, insurance and fuel, will attract a flat MDR of Rs 5 on UPI transactions above Rs 2,000. Capital-market payments, including transactions involving mutual funds, securities, stock brokers and dealers, will attract a lower MDR of 0.02 per cent, subject to a maximum of Rs 300 per transaction.

For consumers, there will be no monthly quota or cap on free UPI usage. The proposed MDR is a charge applicable to merchants in specified transactions. Banks have also been advised to ensure that merchants do not pass the MDR cost on to customers.

Why Traders Are Seeking A Delay

The trader organisations' main concern is the lack of clarity among merchants about the new structure and how it will affect their businesses. They want the implementation pushed beyond the festive season, giving traders more time to understand the rules and prepare for the changes.

The proposed framework also provides for 5 per cent of total MDR collections to be allocated to a dedicated fund for UPI acceptance among small merchants. The MDR collected will also be shared among different players in the UPI ecosystem and is expected to support areas such as UPI expansion, cybersecurity and innovation.

The revised rates are still expected to remain lower than charges generally applicable to cards and digital wallets.