The National Payments Corporation of India (NPCI) has decided to postpone the implementation of the Merchant Discount Rate (MDR) on select merchant transactions conducted through the Unified Payments Interface (UPI) until after the Diwali festival.
The decision has provided temporary relief to traders during the ongoing festive season, when business activities are at their peak. The decision was taken during the UPI and Service Management Committee meeting held on Tuesday, October 13.
According to NPCI, the move was made considering the significant rise in shopping and digital transactions across the country during the festive period. According to the official announcement by NPCI, MDR charges will be introduced after Diwali for select UPI transactions made by customers to merchants, known as Person-to-Merchant (P2M) transactions.
However, NPCI has not yet announced the exact date for implementing the new rule. The organisation has stated that a separate notification will be issued regarding the effective date and other details.
During the festive season, digital payments witness a major surge across retail stores, online shopping platforms, and various business establishments. Keeping this increased transaction activity in mind, the implementation of the charges has been deferred.
What is MDR?
Merchant Discount Rate (MDR) is a service fee charged to merchants by banks or payment service providers for processing digital transactions.
The proposed MDR will not apply to all UPI transactions. It will be limited only to selected merchant transactions, particularly P2M payments.
However, NPCI has not yet revealed important details such as the applicable MDR rate, transaction limits, and the categories of merchants who will come under the new framework. Further clarity is expected once the official guidelines are released.
How Will the Delay Benefit Merchants?
By postponing the implementation of MDR charges, merchants will be able to continue their festive season business activities without any additional transaction costs.
The delay will also provide traders with more time to prepare for any possible changes in transaction expenses after the new rules come into effect. The actual financial impact will become clear only after NPCI announces the final guidelines.
NPCI, which manages India’s retail payment and settlement ecosystem, has not cancelled the MDR proposal but has only deferred its implementation temporarily. Merchants and payment service providers are now awaiting the revised timeline and official instructions from the organisation.
