UPI MDR rollout likely to be deferred to Jan 1, but Centre yet to take a final call

The proposed implementation of the Merchant Discount Rate (MDR) framework for certain UPI transactions from October 15 may be deferred to January 1, 2027, but no final decision has been announced by the government yet, people familiar with the matter have said.

The possible deferment comes amid concerns raised by traders and other stakeholders over the timing of the proposed rollout, particularly as merchants enter the crucial festive sales period when both consumer spending and digital payment transactions typically rise sharply.

The proposed framework envisages an MDR of 0.4 per cent on person-to-merchant (P2M) UPI transactions above Rs 2,000, with the charge capped at Rs 30 for transactions of Rs 75,000 and above.

Traders sought rethink on October 15 rollout

When The Federal spoke to members of a delegation that had met officials in the Finance Ministry following the September 14 notification on the proposed MDR framework, they said the delegation had specifically requested the government to reconsider the implementation timeline.

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The delegation pointed to the upcoming festive season, when merchants across sectors typically see a significant increase in sales and digital payments. The traders’ request was that the government consider postponing the implementation so that the new framework does not have an adverse impact on businesses during the peak festive shopping period.

The delegation also sought adequate transition time for merchants to understand the proposed MDR mechanism and prepare for its implementation.

According to members of the delegation, the request was primarily focused on the implementation timeline rather than a rejection of the framework itself. Traders wanted sufficient time to understand how the proposed charges would work, assess their impact and ensure that businesses are adequately prepared before the new system comes into effect.

Why the timing matters

The October 15 deadline falls during the festive sales period, making the proposed rollout particularly significant for retailers and other merchants.

The festive season is one of the busiest periods for India’s retail economy. Higher footfalls, increased purchases and greater reliance on digital payments mean that even a relatively small change in the cost of processing transactions can have a wider impact on merchants, particularly those operating on thin margins.

Also read: SC refuses interim stay on MDR for UPI transactions above Rs 2,000

The delegation, therefore, argued that introducing the new MDR regime during this period could create avoidable uncertainty for traders at a time when businesses are already dealing with significantly higher transaction volumes.

A deferment until January 1 would allow merchants to complete the festive season under the existing arrangement and then transition to the new framework after getting additional time to prepare.

However, the government has not formally announced any such deferment so far.

What the proposed MDR framework says

The proposed framework provides for an MDR of 0.4 per cent on specified UPI person-to-merchant transactions above Rs 2,000. For payments of Rs 75,000 and above, the MDR would be capped at Rs 30.

The proposed changes represent a significant shift in the UPI payments ecosystem, where merchants have so far largely benefited from zero MDR on UPI transactions.

Also read: Congress calls new UPI charges ‘Modi tax’, alleges PM surrendering to US pressure

The introduction of an MDR has consequently generated concerns among sections of the trading community, even as policymakers and stakeholders examine how the payments ecosystem can be made more sustainable.

For merchants, one of the key issues is predictability. Traders want clarity on the transactions to which MDR would apply, how the charges would be collected and what systems they would need to put in place before the framework becomes operational.

Legal challenge also pending

The proposed MDR framework is also facing a legal challenge in the Supreme Court.

The apex court has refused to stay the Centre’s decision to impose MDR on specified person-to-merchant transactions and has issued notices to the Centre, the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI).

The legal challenge is being watched closely by stakeholders as the government considers the implementation timeline.

Also read: UPI MDR: Trade bodies withdraw ‘No UPI Day’ call after meeting FM

For now, the immediate question for merchants is whether the October 15 deadline will remain in place or be pushed back.

A deferment to January 1, 2027, would give traders additional time to prepare for the new regime and, importantly, avoid introducing the changes during the peak festive shopping period.

But until the government makes a formal announcement, the October 15 rollout remains the stated implementation timeline, and reports of a deferment should not be treated as a final government decision.