UPI 0.4% MDR Charge May Be Deferred To January 2027 As Traders Demand Rollback Ahead Of October 15

Mumbai: Retailers have urged the government to roll back the proposed 0.4% Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions, even as reports on Thursday suggested that the rollout announced for October 15 could be deferred to January 2027.

Quoting a regulatory official and an industry executive familiar with the discussions, reports said the National Payments Corporation of India (NPCI), the umbrella organisation that operates retail payment and settlement systems in India, is expected to take a final decision on the deferment in the coming days. NPCI has not issued any official statement on the reports.

Proposed MDR levy faces trader opposition

NPCI had announced a 0.4% charge for merchants on UPI transactions exceeding Rs 2,000 from October 15, ending more than six years of zero-cost payments. Transactions involving small merchants or vendors whose total monthly UPI QR receipts are below Rs 1 lakh will remain exempt from MDR.

The announcement was opposed by traders, with several associations observing a ‘No UPI Day’ protest on October 2 by refusing to accept UPI payments through their merchant accounts.

CAIT seeks higher transaction exemption limits

The Confederation of All India Traders (CAIT), which had supported the introduction of MDR to cover the security and administrative costs of the UPI mechanism, said it was hopeful of a deferment following its meeting with Finance Minister Nirmala Sitharaman last week.

CAIT national president B C Bhartia said the traders’ body had asked the government to raise the threshold for MDR to Rs 10,000 and increase the exemption limit for small traders to Rs 10 lakh.

“We also asked for clarification on merchant-to-merchant payments. While NPCI has clearly defined person-to-person and person-to-merchant transactions, there is nothing on merchant-to-merchant payments. If this is not clarified, it could lead to double and triple charges on merchants,” Bhartia said.

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Festive season timing raises concerns

Traders have also expressed concern over the timing of the proposed levy, which comes at the beginning of the annual festive season between October and December, when consumer spending traditionally rises.

The Federation of Retail Traders Welfare Association (FRTWA), Mumbai, which wrote to Sitharaman on October 6, said traders across the country were already facing a challenging business environment, with a prolonged slowdown affecting sales, margins and cash flows.

“At a time when the trading community is already under considerable financial pressure, an additional transaction cost of 0.4% would further increase the burden on small and medium-sized traders,” said Viren Shah, president of the FRTWA.

“We told the government that even if it was to introduce the charges, it should wait until December. We are hopeful about a deferment,” Bhartia said.

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