Government Considers Deferring UPI Merchant Discount Rate Rollout to January 2027

The Union government and the National Payments Corporation of India are considering deferring the implementation of the merchant discount rate framework on specified Unified Payments Interface transactions from October 15 to January 1, 2027. The potential postponement follows intense lobbying from merchant bodies, fintech firms, and payment aggregators who raised operational readiness concerns ahead of the peak festive shopping period.

For millions of retail businesses and consumers across India, the delay offers temporary relief from potential cost pressures during a high-volume commercial quarter. Industry associations argued that introducing transaction fees while retail activity surges could strain merchant margins and complicate pricing structures when household budgets are already stretched.

Under the framework approved by the UPI Steering Committee last month, an MDR charge of 0.4 percent was slated to apply on specific person-to-merchant transactions exceeding ₹2,000. The structure includes a cap of ₹300 for payments amounting to ₹75,000 or more, while ordinary person-to-person transfers continue to remain free from any levy.

Sources familiar with the discussions indicated that while the implementation timeline faces a pushback, the core parameters of the approved framework remain unaltered. The delay is intended to grant payment service providers and retail enterprises additional time to upgrade software systems, classify transaction categories accurately, and finalise merchant agreements.

The development unfolds against the backdrop of recent judicial proceedings after the Supreme Court declined to stay the Centre's policy decision permitting MDR levies on designated commercial transactions. Concurrently, payment aggregators have been engaged in separate negotiations with sponsor banks to negotiate a larger retention share of the acquiring banks' portion of the fee.

Final deliberations on the deferred timeline are being reviewed by the UPI Steering Committee in consultation with the finance ministry. Formal notifications detailing the revised rollout schedule are expected to be issued following the conclusion of these stakeholder evaluations.