UPI Merchant Fee Implementation Delayed Until January 1
The introduction of the UPI merchant fee has been postponed to January 1, allowing merchants to enjoy free transactions during the festive season.
UPI payments will remain free for merchants through the festival season.
The Merchant Discount Rate (MDR) is expected to be introduced after Christmas.
Exemptions for small businesses with annual turnover up to ₹40 lakh are under consideration.
The implementation of the Merchant Discount Rate (MDR) for UPI transactions has been postponed until January 1, 2024, ensuring that merchants can continue to process payments without fees during the ongoing festival season, which lasts until Christmas. This decision follows discussions among members of the UPI and Services Steering Committee, led by the National Payments Corporation of India (NPCI), who convened on Wednesday to clarify the timeline for the MDR's introduction.
Retail traders' associations had previously expressed strong opposition to the proposed fee structure, even organizing a 'No UPI Day' on October 2 to protest. However, they withdrew their protest after a meeting with Union Finance Minister Nirmala Sitharaman last month. According to sources familiar with the discussions, the UPI Steering Committee confirmed that the MDR would likely be implemented after the festive period.
The MDR will apply to transactions exceeding ₹2,000, with a fee of 0.40% capped at ₹300 for peer-to-merchant transactions. Additionally, a flat fee of ₹5 will be charged for certain categories, including bill payments and utilities, for transactions above ₹2,000. Notably, transactions up to ₹2,000 will remain exempt from the MDR, as previously decided. Furthermore, discussions are ongoing regarding raising the daily UPI transaction limit for specific categories from ₹1 lakh to ₹2 lakh.
In September, UPI recorded an impressive average of 802 million transactions per day, with a total transaction value of ₹97,913 crore. This represents a 22.6% increase in transaction volume compared to the previous year, with 24.07 billion transactions recorded in September alone. The total value of transactions also saw an 18% rise, reaching ₹29.37 trillion.
Looking ahead, the UPI Steering Committee is expected to finalize the MDR implementation details soon, with a focus on ensuring that small merchants, defined as those with an annual turnover of up to ₹40 lakh, are exempt from these fees. The committee's decisions will significantly impact the retail sector and the broader digital payment landscape in India as it navigates the balance between regulation and merchant support.
