Winning Bizness Desk

Mumbai.The Centre may postpone the proposed 0.4% merchant discount rate (MDR) on high-value Unified Payments Interface (UPI) transactions until January 1, 2027, keeping digital payments free for merchants during the festive season, according to a report citing sources.

The new rules were scheduled to take effect on October 15, 2026, and would have applied to payments exceeding Rs 2,000 for eligible large merchants.

The Press Trust of India (PTI) reported that the government was considering delaying implementation to prevent additional costs for traders during the festive shopping period. An official decision is expected in the coming days.

Government Weighs Delay To Protect Festive Trade

The proposed postponement would give retailers and payment service providers more time before the new fee structure comes into force.

The festive season is an important period for retail businesses, with consumer spending typically increasing across several categories. Traders have opposed the proposed charges, arguing that additional transaction costs could put pressure on businesses operating on thin margins.

If the government defers the rules, eligible UPI transactions will continue without the proposed merchant fee during the festive period.

Fintech Stocks Fall After Reports Of Possible Delay

Shares of listed fintech companies came under pressure following reports that the proposed merchant charges could be postponed, affecting expectations surrounding revenue from digital payment services.

Paytm, MobiKwik, Pine Labs and NPST all ended lower on the stock market.

• Paytm: The stock fell as much as 10% during trading to Rs 1,561. It recovered some losses before closing 5.42% lower at Rs 1,640.
• MobiKwik: Shares dropped 8.43% to Rs 235 at their lowest during the session before closing 4.57% lower at Rs 245.
• Pine Labs: The stock touched a low of Rs 169 and ended 4.39% lower at Rs 170.
• NPST: Shares closed 3.39% lower at Rs 1,791.30.

The figures reflect the trading session described in the report.

Large Merchants Face Charges On High-Value Transactions

Under the proposed rules, merchants collecting more than Rs 1 lakh a month through UPI would be classified as large merchants and would have to pay a 0.4% MDR on individual transactions exceeding Rs 2,000. Goods and services tax (GST) at 18% would be levied on the MDR amount.

The proposed structure includes several exemptions and limits:

• Small merchants: Businesses collecting up to Rs 1 lakh a month through UPI would pay no MDR, even on transactions exceeding Rs 2,000.
• Category change: Merchants exceeding Rs 1 lakh in monthly UPI collections for three consecutive months would automatically move into the large-merchant category.
• Smaller payments: Transactions of Rs 2,000 or less would remain free for large merchants as well.
• Maximum fee: For transactions worth Rs 75,000 or more, the proposed MDR would be capped at Rs 300, plus GST.
• Individual transactions: The Rs 2,000 threshold would apply to each payment, rather than the merchant's total daily sales.

Essential Services Get Lower Flat Transaction Fees

Certain sectors would face a flat fee instead of the proposed percentage-based MDR. Petrol pumps, railways, bill payments, telecommunications, insurance and education-related merchants would pay Rs 5 on transactions exceeding Rs 2,000. The proposed UPI charges would also remain lower than typical card payment fees. Credit card MDR generally ranges between 1.5% and 2.5%, while debit card charges can reach 0.9%.

MDR Explained: Who Pays The Transaction Fee?

Merchant discount rate is the fee a business pays banks and payment service providers for processing digital payments through systems such as card machines, payment gateways and UPI. The charge helps cover the costs of payment infrastructure and transaction processing. Under the proposed arrangement, the merchant, rather than the customer, would bear the fee.

The proposed exemptions for small merchants and low-value payments are intended to limit the impact on businesses, while the percentage-based charge would apply to qualifying transactions by large merchants.

Traders Oppose Charges, Warn Of Higher Costs

Retail traders and distributors have opposed the proposed MDR, arguing that businesses with narrow profit margins cannot easily absorb additional transaction costs.

Their objections include the following:

• Additional fees would increase operating costs for small-margin retailers and distributors.
• Digital payments should simplify transactions rather than place a fresh financial burden on merchants.
• UPI has helped reduce cash transactions, and traders say they should not be penalised for supporting a more transparent payment system.
• Introducing charges could undermine efforts to promote Digital India and wider digital payment adoption.

Trader organisations have warned that protests could intensify if the government does not reconsider the proposal. The final decision on the implementation date remains pending. If the government approves the reported postponement, the proposed merchant charges would be deferred until January 1, 2027, allowing UPI payments to continue without the new MDR during the festive season.