Government May Delay Merchant Discount Rate on UPI Until 2027
The rollout of the Merchant Discount Rate on UPI transactions, initially set for October 15, 2026, may be postponed to avoid disruptions during the festive season.
MDR on UPI transactions above Rs 2,000 was announced last month.
The potential delay aims to prevent retail payment disruptions during the festive period.
Shares of digital payment companies fell following news of the possible postponement.
The Indian government is considering postponing the implementation of the Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions, originally scheduled to take effect on October 15, 2026. According to sources familiar with the discussions, the delay could extend the rollout to January 2027, allowing additional preparation time for payment companies and minimizing disruptions during the busy festive shopping season.
In September, the government announced the end of the zero-fee structure for UPI transactions, introducing a charge of 0.4% for transactions exceeding Rs 2,000. This change is significant as UPI is widely used across India, with over 500 million users making payments for various goods and services. The introduction of this fee coincides with the festive season, which typically sees a surge in consumer spending.
Industry insiders indicated that the proposed delay is aimed at ensuring a smooth transition for merchants and consumers alike. This decision comes as investors had viewed the MDR as a crucial monetization opportunity for payment service providers. Following the news of the potential delay, shares of major digital payment companies, including Paytm and One Mobikwik Systems, experienced notable declines.
Reserve Bank of India Governor Sanjay Malhotra commented on the situation, stating that the introduction of a minor fee is not expected to significantly impact UPI transaction volumes. He emphasized that, as of now, there has been no observable drop in transaction volumes, suggesting that the market remains resilient despite the impending changes.
The introduction of the MDR is part of a broader strategy to ensure the long-term sustainability of the UPI ecosystem while maintaining its accessibility for everyday transactions. The government has clarified that person-to-person UPI payments will remain free, and small-value transactions under Rs 2,000 will not incur any charges, which constitute over 95% of UPI transactions. The upcoming months will be crucial as stakeholders await further announcements regarding the final decision on the MDR rollout.
