UPI MDR Charges Delayed: What Happens After Diwali?

UPI has become an integral part of the purchasing process in India, whether one is purchasing groceries from a nearby store or expensive electronic items. The ease of use and efficiency of the system has made it a favorite mode of payment among both consumers and businesses. But an amendment to the charges applicable to UPI transactions has brought up some concerns among merchants and payments companies. The NPCI has decided to delay the implementation of MDR charges on selected UPI transactions till after Diwali.


Rollout has been delayed by NPCI's UPI Steering Committee in order to prevent disruption in business activities at the time of the festive season. Diwali is one of the busiest shopping times when customers shop more for clothes, electronics, gifting and other products.


Merchant organizations, financial technology companies, and Payment Service Providers were worried about the introduction of such charges at this busy time. They wanted further information on fees, payment methods, and the nature of UPI payments on which such fees will apply.


In NPCI's Press Release issued on October 13, it has been said that such fees will be implemented right after Diwali in a separate announcement.


MDR refers to Merchant Discount Rate. It is the charge levied on the merchant for the processing of a digital payment using a payment service provider or payment network. The MDR charge can either be shared by the involved parties, depending on the payment structure.

For instance, when the merchant processes an eligible payment of ₹3,000 at an MDR charge of 0.4%, the MDR charge will be ₹12. This implies that the merchant's earnings could reduce by this amount, depending on the settlement terms.

The NPCI's proposed rate is 0.4% or 40 basis points for eligible person-to-merchant UPI transactions above ₹2,000. This is not a charge paid automatically by customers when making UPI payments.


Not at all. The MDR fees proposed are meant for selective P2M UPI transactions. A P2M transaction is one made by consumers to merchants, for instance, payments made in retail stores or online stores.

There are other kinds of transactions like the person-to-person (P2P) where an individual sends money to another individual, which is a different kind of transaction. The announcement does not mean that all the UPI transactions will be charged as per the proposed fee structure.

Merchants also need to differentiate between the transaction size and the mode of transaction. This is because the applicable fee will depend on the regulations that will come out from NPCI.

Even a slight transaction fee can become a cost for merchants making many digital payments. The store that processes hundreds of transactions will have to look into their margins, the payment services they use, and how they account for transactions.

On the other hand, the implementation of charges during the shopping event is not good for merchants and customers. Therefore, the delay in implementation gives the merchants more time to prepare for the event.

NPCI will announce the new implementation date after Diwali. In the meantime, merchants need to keep track of any official announcements and make sure that they know the rules that apply to them.

It is important to note that the implementation has been delayed, not necessarily canceled. The announcement will determine when the proposed fees will come into effect and what transactions they will apply to. As far as customers are concerned, the announcement does not mean that regular UPI transactions will start being charged. As for merchants, it will be crucial for them to know the rules after the announcement.


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