Overview
- The UPI Steering Committee approved a targeted merchant discount rate of 0.4% on person-to-merchant transactions above ₹2,000 with a ₹300 cap and a flat ₹5 fee for specified sectors, and consumers will not be charged for these payments.
- The MDR was scheduled to take effect on October 15, but NPCI is reported to be weighing a postponement to after the festive season or to January 1, 2027, with a decision said to be imminent.
- Merchant groups, fintechs and payment providers have asked for a delay and wider exemptions, including proposals to exempt firms with annual turnover up to ₹40 lakh, citing category confusion and technical readiness problems.
- Regulators have defended the move: the Department of Financial Services said merchants cannot pass the charge to customers, and RBI Governor Sanjay Malhotra said the small fee is unlikely to materially reduce overall UPI volumes.
- Operational complexity and potential market effects remain key issues because over 95% of P2M transactions are under ₹2,000, systems must tag transactions to different MDR buckets, and payments-sector stocks dipped on the uncertainty.