NPCI defers MDR on select UPI merchant transactions post Diwali

The UPI and Services Steering Committee has decided to defer Merchant Discount Rate (MDR) on select Person-to-Merchant (P2M) UPI transactions after Diwali, with the exact date to be announced separately, the National Payments Corporation of India (NPCI) said in an official statement on Tuesday.

The UPI and Services Steering Committee has decided to defer Merchant Discount Rate (MDR) on select Person-to-Merchant (P2M) UPI transactions after Diwali, with the exact date to be announced separately, the National Payments Corporation of India (NPCI) said in an official statement on Tuesday. The decision comes as the committee took the festive season into consideration while deciding the implementation timeline for the charges on specified merchant transactions.

"Keeping in mind the festive season, Merchant Discount Rate (MDR) on select Person-to-Merchant (P2M) UPI transactions, shall be implemented immediately post Diwali at a date to be notified separately," NPCI said in its statement. MDR is the fee paid by merchants to banks and payment processors for accepting digital payments.

Under the framework announced earlier, MDR of 0.4 per cent applies to specified merchant transactions above Rs 2,000, with a cap of Rs 300 for transactions exceeding Rs 75,000. Transactions up to Rs 2,000 remain free. The framework also provides for a flat MDR of Rs 5 on transactions above Rs 2,000 in specified essential sectors, including railways, telecom, insurance, fuel, utilities and education.

Small merchants collecting up to Rs 1 lakh per month through existing QR codes will continue to be covered under the zero-MDR framework, while person-to-person (P2P) UPI transactions will remain free irrespective of the amount transferred. The Finance Ministry had earlier clarified that the new framework would not affect person-to-person transactions and that payments to merchants up to Rs 2,000, along with transactions covered under the zero-MDR framework for small merchants, would also remain free.

"Consequently, approximately 96 per cent of all P2M transactions will remain unaffected," the Ministry had said in its official statement. According to the Finance Ministry, the charge is distributed among participants in the payment ecosystem, including banks and payment application providers, to support the operation and continued expansion of the UPI ecosystem.

The Ministry had also clarified that MDR is neither a tax nor a charge collected by the government or NPCI. With the implementation now scheduled for after Diwali, the existing zero-MDR provisions for consumers and eligible small merchants will remain in place, while charges will apply only to specified merchant transactions covered under the framework. (ANI)