Key takeaways:
- The UPI MDR rollout may move from October 15 to January 1.
- The proposed 0.4% MDR applies to eligible P2M transactions above Rs 2,000.
- Businesses with a turnover up to Rs 40 lakh may receive an exemption.
A proposal to defer the rollout of Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions to January 1 from October 15 is under consideration. A decision is expected within the next few days. The proposed delay would move the fee rollout beyond the festive season, when retailers typically see higher transaction volumes.
UPI MDR rollout faces possible delay
Members of the UPI and Service Steering Committee, headed by the National Payments Corporation of India (NPCI), met on Wednesday to discuss the timing of the MDR rollout and other related considerations. The UPI MDR rollout was earlier scheduled to begin on October 15.
The proposal follows concerns raised by traders and industry associations over the timing of the fee. Retailers and wholesale traders had raised concerns that introducing MDR during the festive sales period could increase transaction costs for businesses.
Earlier this month, wholesale traders and retailers observed a “No UPI Day” to protest the proposed MDR on UPI payments above Rs 2,000.
Under the proposed framework, NPCI had announced an MDR of 0.4% for select Person to Merchant (P2M) UPI transactions above Rs 2,000. Transactions up to Rs 2,000 would remain exempt from the charge.
The proposed exemption for transactions up to Rs 2,000 is expected to remain unchanged even if the rollout is deferred to January 1.
Possible exemption for smaller businesses
The committee is also considering changes to the eligibility criteria for businesses that would be exempt from MDR. Under the existing proposal, businesses with a monthly turnover of up to Rs 1 lakh were expected to receive an exemption.
The committee is considering raising the threshold to businesses with an annual turnover of up to Rs 40 lakh. If approved, the change would expand the number of businesses that could remain outside the MDR framework.
The possible delay also affected shares of payment aggregators. Paytm shares fell 10% shortly after the report emerged, briefly reaching the lower circuit at Rs 1,558.80 per share. The decline reduced Paytm’s market capitalisation by nearly Rs 10,972 crore within minutes of the market opening.
Mobikwik shares fell more than 8% to Rs 234.52, while Pine Labs shares declined more than 4% to Rs 170.21.
For Indian retailers and other businesses, the final decision on the rollout date and exemption threshold will determine when eligible UPI transactions begin attracting the proposed 0.4% MDR. The exemption for transactions up to Rs 2,000 is expected to remain in place under the proposal.
