No MDR on UPI from October 15? Government Considers Delaying Rollout of Fees

The proposed Merchant Discount Rate (MDR) on certain Unified Payments Interface (UPI) transactions may not come into effect from October 15 as originally planned. According to reports, the government and stakeholders are considering delaying the rollout until January 1, 2027, providing merchants and the digital payments ecosystem more time to prepare for the new fee structure.

The proposal comes amid concerns from traders, retailers and other industry stakeholders over the timing of the MDR rollout. With the festive shopping season underway, businesses are expected to witness a sharp increase in digital payments. A delay would therefore provide temporary relief to merchants during one of the busiest periods of the year. However, no final decision has been announced yet, and the October 15 implementation date technically remains in place until the authorities formally notify any change.

What Is the Proposed UPI MDR?

The Merchant Discount Rate is a fee charged to merchants for processing digital payments. Under the proposed framework, a 0.4% MDR would apply to specified person-to-merchant UPI transactions above ₹2,000, subject to prescribed caps and exemptions.

The move represents a significant change for UPI, which has largely operated without MDR for merchant transactions since its rapid expansion. The government has argued that a sustainable revenue mechanism is required to support the growing payments infrastructure, including technology, cybersecurity and other costs associated with maintaining the UPI ecosystem.

Importantly, the proposed MDR is intended to be paid by merchants and not directly by consumers. The government has also indicated that payment providers and banks should not pass the charge on to customers. Person-to-person UPI transactions are expected to remain free.

Why Is the Rollout Being Considered for Delay?

The possible postponement is being discussed against the backdrop of the festive season, when UPI usage typically rises sharply. Traders’ organisations have expressed concerns that introducing a new cost at this time could increase pressure on businesses, particularly retailers operating on relatively thin margins.

Reports indicate that traders’ associations have approached the National Payments Corporation of India (NPCI), seeking more time before the new framework takes effect. Discussions involving the Department of Financial Services and NPCI are reportedly underway, although a final decision has not yet been taken.

A January 1, 2027 rollout would effectively move the implementation beyond the peak festive shopping period. It would also give banks, payment companies and merchants additional time to make necessary technological and operational changes.

Possible Relief for Small Businesses

Another issue reportedly being considered is the scope of exemptions for smaller businesses. Reports suggest that the authorities may examine whether businesses with annual turnover of up to ₹40 lakh should be exempted from MDR.

The proposed framework already contains exemptions for certain low-value transactions and small merchants. Expanding the exemption could reduce the impact of MDR on smaller retailers and businesses that rely heavily on digital payments but operate with limited margins.

However, the exact details of any revised exemption structure will depend on the final decision by the authorities.

What Will Happen to Consumers?

For ordinary UPI users, the proposed MDR framework is not expected to mean that they will have to pay a separate fee every time they make a UPI payment. The proposed charge is aimed at eligible merchant transactions, while person-to-person transfers are expected to remain free.

The government has also been working to ensure that merchants do not simply pass the MDR cost directly to customers. Earlier reports indicated that authorities planned close monitoring to prevent businesses from adding the proposed fee to consumers’ bills.

A Major Change for India’s Digital Payments Ecosystem

UPI has become one of India’s most important digital payment systems, handling hundreds of millions of transactions every day. The introduction of MDR is therefore being closely watched by banks, payment companies, merchants and consumers.

Supporters of the proposed fee argue that UPI’s enormous scale requires a sustainable financial model to maintain infrastructure and support continued innovation. Critics, meanwhile, fear that additional costs could discourage merchants from accepting digital payments or encourage some businesses to return to cash.

The issue has also attracted political attention, with opposition parties and traders raising concerns about the proposed charges.

Read more like this:

• नेहा बोरा: बीजेपी समर्थक परिवार से वामपंथी आंदोलन तक का सफर
• CEC Protest Live Updates: तीसरे दिन भी जारी कांग्रेस का प्रदर्शन, खड़गे बोले- गांधी स्मारक की ओर जा रहा हूं

Final Decision Still Pending

For now, the key point is that October 15 remains the previously announced implementation date, while a possible postponement to January 1, 2027 is under consideration. The final decision is expected after consultations between the relevant authorities and stakeholders.

If the delay is approved, merchants would get additional breathing room during the festive season, while payment companies would gain more time to prepare for the new system. If the October 15 date is retained, the industry will have to move ahead with implementation as scheduled.

The coming days are therefore likely to be crucial for India’s UPI ecosystem, with merchants, payment firms and consumers waiting for clarity on when the proposed MDR framework will actually take effect.