New Delhi: India is considering postponing the planned introduction of a merchant fee on certain Unified Payments Interface transactions after traders, fintech companies and payment firms asked for more time to prepare for the new system.
The proposed Merchant Discount Rate, or MDR, was scheduled to take effect from October 15. Under the framework, eligible merchant payments above ₹2,000 would attract an MDR of 0.4 percent, with the charge capped at ₹300 for a single transaction.
The National Payments Corporation of India, which operates the UPI system, is considering requests to postpone the rollout. The Finance Ministry is also involved in the discussions. January 1, 2027 has emerged as a possible new date, but no final decision has been announced.
The reports triggered a sharp reaction in Indian payment stocks. Shares of Paytm parent One 97 Communications and One MobiKwik Systems fell by as much as 10 percent during intraday trading. The market reaction reflected concerns that a delay could postpone expected new revenue opportunities for payment companies.
The proposed MDR is a merchant side charge and is not a direct fee on consumers using UPI. Person to person UPI payments will remain free, while transactions of up to ₹2,000 are also protected from the charge under the current framework.
The new MDR framework would create a revenue mechanism within the digital payments ecosystem after years in which UPI operated without a conventional merchant discount charge. The framework is intended to establish a system for charges on eligible merchant transactions while keeping smaller UPI payments free.
The proposed framework sets the MDR at 0.4 percent for eligible merchant transactions above ₹2,000, with the charge capped at ₹300. The cap would apply to transactions of ₹75,000 or more.
Trader groups and other industry participants have asked for the October 15 implementation to be postponed. A major concern is the timing, as the rollout would take place during India's important festive shopping season, when retail payments are expected to be particularly high.
Industry groups have also sought more time for merchants and payment companies to prepare their systems. Discussions have included possible changes to exemptions for smaller businesses, but no such change has been formally confirmed.
The possible postponement comes only days after Reserve Bank of India Governor Sanjay Malhotra said he did not expect a small MDR to have a major effect on UPI transaction volumes.
Malhotra said the central bank had not seen a decline in UPI activity and indicated that the new MDR was unlikely to significantly affect payment volumes.
UPI has become one of the world's largest digital payment systems. It processed 24.07 billion transactions worth ₹29.37 trillion in September, according to data from the National Payments Corporation of India.
The proposed MDR framework has also faced a legal challenge. On September 28, the Supreme Court refused to grant an interim stay against the framework but sought responses from the central government, the Reserve Bank of India and the National Payments Corporation of India.
The court did not suspend the planned October 15 implementation. The postponement now under consideration is being discussed separately by NPCI and the authorities following requests from industry groups.
For payment companies and banks, the timing of the MDR is important because the new system is expected to create an additional revenue stream within the payments ecosystem. A delay could therefore postpone the expected financial benefits for companies preparing for the new model.
For consumers, the immediate impact is expected to be limited because the MDR is primarily a merchant side charge. The key question now is whether the October 15 deadline will remain in place or the rollout will be moved to a later date.
A final decision is expected in the coming days. Until then, October 15 remains the scheduled implementation date, while January 1, 2027 is only a proposed alternative.