UPI merchant transactions to attract charges post-Diwali

The NPCI has announced plans to levy MDR on specific categories of merchant transactions conducted through the Unified Payments Interface (UPI), marking a significant change to India's digital payment ecosystem. The charges will apply to Person-to-Merchant transactions, though the NPCI has not yet disclosed which merchant categories will be subject to the new fee structure.

According to the NPCI's announcement, the implementation timeline has been set for the post-Diwali period, with a specific date to be communicated separately. This phased approach suggests the regulator is providing stakeholders with adequate notice to prepare for the transition.

The introduction of MDR on UPI merchant payments represents a departure from the zero-fee model that has characterized UPI transactions since the platform's inception. Such charges are common in other digital payment systems globally and are intended to sustain the payment infrastructure's operations.

Industry observers have long anticipated regulatory changes to UPI's cost structure, particularly as transaction volumes have surged. The move aligns with international practices where payment service providers recover operational costs through merchant fees, though consumer-to-consumer UPI transfers are expected to remain unaffected by the new policy.