The implementation of the Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions over ₹2,000 at medium and large merchants has been postponed by the National Payments Corporation of India (NPCI). Initially set to take effect on October 15, the rollout is now scheduled for a date immediately following Diwali, though no specific date has been provided.
The decision to delay was reportedly made at the Prime Minister’s Office after significant lobbying from traders' associations. Praveen Khandelwal, founder and secretary-general of the Confederation of All India Traders (CAIT) and a Bharatiya Janata Party (BJP) Lok Sabha Member, expressed approval of the postponement. He emphasized that the delay would safeguard traders' interests and maintain the momentum of digital payments during the festive season.
The proposed MDR was to be set at 0.4% for UPI transactions exceeding ₹2,000. However, transactions related to the capital market and strategic sectors were expected to have different MDR rates. In a statement released on Tuesday, the NPCI confirmed that the UPI and Services Steering Committee decided to implement the MDR immediately after Diwali, with the exact date to be announced later.
The Supreme Court has intervened, directing the NPCI, the Union government, and the Reserve Bank of India (RBI) to submit affidavits by late October. These documents are to explain the rationale behind imposing MDR on certain UPI transactions.
CAIT's Khandelwal expressed gratitude to Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman for their understanding of traders' concerns. He highlighted that the decision followed a meeting on September 30, where a delegation of about 20 trade leaders led by him met with Finance Minister Sitharaman to discuss the implications of the proposed MDR.
While CAIT supports digital payments, Khandelwal stressed the importance of keeping the system affordable and sustainable, especially for small businesses. The traders' body described the delay as a “timely and pragmatic” decision, particularly during the festive and wedding season, when millions of traders and micro, small, and medium enterprises (MSMEs) rely on increased business volumes.
CAIT warned that additional transaction costs could impose an unnecessary burden on merchants operating on thin margins, potentially discouraging the broader acceptance of digital payments. They argued that the MDR could have led to a shift back to cash transactions, especially among businesses with limited pricing flexibility.
In a related development, liquefied petroleum gas (LPG) distributors have approached the Petroleum and Natural Gas Ministry, seeking exemption from MDR or any other payment infrastructure-related levies. These distributors argue that they lack the autonomy to adjust cylinder prices and receive fixed commissions, making MDR levies detrimental to their earnings. They also raised concerns that such levies could lead to a return to cash payments or staggered payment methods to avoid the ₹2,000 threshold, causing logistical challenges.
