NPCI Postpones 0.4% MDR on UPI Payments Above Rs 2,000

The National Payments Corporation of India (NPCI) has deferred the proposed levy of a 0.4 per cent Merchant Discount Rate (MDR) on select Unified Payments Interface (UPI) transactions exceeding Rs 2,000, with implementation now scheduled for after Diwali on a date to be announced separately.

The levy was originally scheduled to come into effect from October 15, according to an NPCI circular issued on September 15. In a statement on Tuesday, NPCI said the UPI and Services Steering Committee had decided to postpone the implementation, keeping the festive season in mind.

The MDR is payable by merchants rather than consumers and is capped at Rs 300 for transactions of Rs 75,000 or more. The proposed charges had drawn criticism from Opposition parties, which described the levy as a tax and argued that it could increase the financial burden on consumers.

Under the September circular, person-to-person payments and most routine merchant transactions were to remain free. Transactions involving essential services, including railways, telecom, fuel and insurance, were to attract a flat fee of Rs 5 for payments exceeding Rs 2,000. Capital market transactions, including mutual fund investments and stockbroking payments, were assigned a lower MDR of 0.02 per cent, capped at Rs 300.

NPCI, which operates the UPI platform, had proposed the charges to establish a sustainable revenue framework for the digital payments ecosystem. The collections were to be distributed among participating entities, with 40 per cent allocated to customers' banks, 30 per cent to payment gateways, 20 per cent to the UPI application and the remaining 10 per cent to the sponsoring bank.

Welcoming the deferment, the Confederation of All India Traders (CAIT) described the decision as timely and pragmatic, particularly during the festive and wedding season, when traders and micro, small and medium enterprises typically depend on higher business volumes.

CAIT said additional transaction costs could have burdened merchants operating on thin margins and discouraged wider acceptance of digital payments. The trade body said the decision followed a September 30 meeting in which a delegation of around 20 trade leaders met Finance Minister Nirmala Sitharaman and raised concerns over the proposed levy.