UPI Merchant Discount Rate (MDR) Rollout May Be Deferred to January 2027

The planned rollout of a Merchant Discount Rate (MDR) on certain UPI transactions, initially set for October 15, could be postponed to January 1, 2027. This potential deferral comes amid significant opposition from retail trader associations.

A postponement would allow merchants to continue processing eligible payments without incurring MDR charges through the upcoming festive season. A final decision on the matter is expected soon.

The UPI and Services Steering Committee, led by the National Payments Corporation of India (NPCI), met to discuss the framework. The committee is also considering increasing the exemption threshold for small businesses, potentially to an annual turnover of up to ₹40 Lakh (approximately $480 USD). This would be a substantial increase from the earlier proposed exemption for merchants receiving up to ₹1 Lakh (approximately $1,200 USD) monthly.

MDR is a fee charged to merchants for processing digital payments. Under the original proposal, a 0.40% charge would apply to eligible person-to-merchant (P2M) UPI transactions exceeding ₹2,000 (approximately $24 USD), capped at ₹300 (approximately $3.60 USD) per transaction. Certain categories, like utility bills and fuel, were slated for a flat fee of ₹5 (approximately $0.06 USD) for transactions over ₹2,000.

Retailer associations have argued that the proposed charges would increase operational costs, particularly for businesses with thin profit margins. Despite the continued growth in UPI transaction volumes across India, concerns remain about the financial impact of these new fees on the retail ecosystem.