Rollout of fee on UPI transactions put off beyond Deepavali on appeal by traders, Pg1

Key Highlights:

• The National Payments Corporation of India (NPCI) has postponed the implementation of the Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions.
• The MDR was originally scheduled to be levied from October 15, 2026, but is now deferred until "immediately after Deepavali".
• The proposed MDR was set at 0.4% on Person-to-Merchant (P2M) UPI transactions exceeding ₹2,000.
• The decision to delay was made by the Prime Minister's Office following strong appeals from traders, including the Confederation of All India Traders (CAIT).
• The Supreme Court has directed NPCI, the Union government, and the Reserve Bank of India (RBI) to explain the rationale behind imposing MDR on specified UPI transactions.

Detailed Insights:

• The postponement aims to support traders and Micro, Small, and Medium Enterprises (MSMEs) during the crucial festive and wedding season, which sees higher business volumes.
• CAIT welcomed the delay, emphasizing its role in protecting traders' interests and sustaining the momentum of digital payments.
• The MDR framework, initially approved by NPCI on September 15, 2026, was intended to create a revenue stream for the digital payments ecosystem.
• While a 0.4% MDR was proposed for general P2M transactions above ₹2,000, different rates were specified for strategic sectors.
• For instance, capital market transactions were to attract a 0.02% MDR (capped at ₹300), and certain public services like railways and telecom a flat ₹5 fee.
• Person-to-Person (P2P) UPI transactions will continue to remain free, irrespective of the transaction amount.
• The government has advised banks to ensure that merchants do not pass MDR charges to customers, and UPI application providers are prohibited from imposing platform fees.

Key Concepts Involved:

• National Payments Corporation of India (NPCI): An umbrella organization for operating retail payments and settlement systems in India, established by the RBI and Indian Banks' Association (IBA).
• Unified Payments Interface (UPI): An instant real-time payment system developed by NPCI that facilitates inter-bank P2P and P2M transactions via mobile.
• Merchant Discount Rate (MDR): A fee paid by a merchant to the acquiring bank for processing digital transactions made through debit cards, credit cards, or UPI.
• Person-to-Merchant (P2M) Transactions: Digital payments made by an individual to a business or merchant for the purchase of goods or services.
• Confederation of All India Traders (CAIT): A leading national organization representing the interests of traders and small businesses across India.