UPI Charges From January 2027? MDR Rollout May Be Deferred From October 15: Report

The possible shift comes ahead of the festive season, when merchants typically see higher transaction activity and consumers make greater use of digital payments.

The proposed structure applies a 0.4 per cent MDR to specified person-to-merchant (P2M) UPI transactions above Rs 2,000.

Source : Gemini AI

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Key points generated by AI, verified by newsroom

• UPI MDR implementation likely deferred until January 2027.
• 0.4% MDR applies to specific merchant UPI transactions.
• Payment aggregators and banks still negotiate MDR revenue sharing.

The proposed merchant discount rate (MDR) on certain UPI payments may take effect from January 1, 2027, instead of October 15, as the payments industry seeks more time to prepare for the new system, media reports stated.

A final decision on the deferment is yet to be taken. The possible shift comes ahead of the festive season, when merchants typically see higher transaction activity and consumers make greater use of digital payments.

Citing people familiar with the matter, Financial Express reported that there is no proposal to alter the MDR framework itself. The change under consideration is limited to the implementation date.

What The New UPI MDR Framework Proposes

The proposed structure applies a 0.4 per cent MDR to specified person-to-merchant (P2M) UPI transactions above Rs 2,000.

For transactions of Rs 75,000 and above, the charge would be capped at Rs 300.

The framework keeps person-to-person payments outside the levy, while small merchants will also continue to have zero MDR.

This means the proposed charge would apply only to a defined category of merchant transactions rather than UPI payments as a whole.

Payment Aggregators And Banks Yet To Finalise Revenue Sharing

While the implementation date is under consideration, another set of discussions is taking place between payment aggregators and their sponsor banks.

The report noted that payment aggregators are seeking 50-80 per cent of the acquiring banks' share of the MDR revenue. The negotiations have not yet been concluded.

The discussions form part of preparations for the new commercial arrangement that would accompany the introduction of MDR on eligible UPI transactions.

Supreme Court Challenge Continues

The proposed rollout also comes while the MDR framework faces a legal challenge.

On September 28, the Supreme Court declined to stay the Centre's decision to impose MDR on specified P2M UPI transactions.

The court has issued notices to the Centre, Reserve Bank of India (RBI) and National Payments Corporation of India (NPCI) on a petition challenging the framework.

The legal proceedings are separate from the possible change in the implementation timeline.

RBI Governor Says Impact On Volumes May Be Limited

RBI Governor Sanjay Malhotra has indicated that he does not expect the proposed charge to materially affect UPI usage.

Speaking at the post-monetary policy press conference on Wednesday, Malhotra said the decision on MDR had already been taken and that there had been no decline in UPI transaction volumes so far.

He said he personally did not expect "a small charge" to have a major impact.

If approved, the proposed deferment would move the start of the MDR regime from October 15 to January 1, 2027, giving merchants and payment ecosystem participants additional time to prepare for the change.