Trade associations across the country have urged the National Payments Corporation of India (NPCI) to postpone the implementation of the newly proposed Merchant Discount Rate (MDR) charges on business transactions made through the Unified Payments Interface (UPI). They have requested that it be postponed until the end of the festive season or early next year, as the new rules are set to come into effect from October 15. This was reported by NDTV Profit in its article.

Trade associations are concerned that sales are at their peak during the festive season and implementing the new charges at this crucial time will have a negative impact on traders. The NPCI has formulated this new MDR framework only after consulting stakeholders. However, no decision has been taken on the latest plea by traders.

According to the new rules announced by NPCI, a flat fee of Rs 5 will be levied on UPI payments above Rs 2,000 in selected business categories. At the same time, there will be a 0.4 percent fee for transactions above Rs 2,000 for large merchants. The upper limit on this has been set at Rs 300. A 0.02 percent MDR will be applicable for capital market transactions like mutual funds and securities. The upper limit for this will also be Rs 300.

However, NPCI estimates that these changes will affect only 4 percent of business transactions and more than 95 percent of person-to-merchant (P2M) UPI payments will not be affected by these charges. It has clarified that there will be no MDR charges for small merchants using the peer-to-peer (P2P) model. There will be no burden of any charges on ordinary individual consumers. They can make UPI payments free of cost as usual.

The revenue collected through this MDR will be used for expanding the UPI system, improving cybersecurity, and innovation. 5 percent of the total MDR collection will be allocated to a special fund to be set up to promote UPI usage among small merchants. Notably, NPCI has issued clear instructions to banks to ensure that merchants do not pass on these MDR charges to customers.