Extra charge on large UPI payments delayed, who will be impacted?

India may push back the planned introduction of a charge on certain high-value UPI merchant payments, giving payment companies more time to prepare their systems and merchants some relief during the busy festive season. The new 0.4 percent Merchant Discount Rate (MDR) was scheduled to come into effect from October 15. However, discussions are now underway to delay its implementation by a few months, a regulatory official and an industry executive familiar with the matter told Reuters. A final decision from the National Payments Corporation of India (NPCI) is still awaited and is expected in the coming days.The charge could instead be introduced in January, the industry executive told Reuters. Here is everything you need to know.Why is the UPI charge being delayed?The timing of the proposed MDR has become an important issue because it was due to start just as India's festive shopping season gets underway. Consumer spending typically rises between October and December, when UPI is widely used for everything from everyday purchases to expensive products.A delay would give payment companies additional time to update their systems. It could also help merchants adjust to the new cost without having to deal with the change during the peak festive period. UPI has remained popular in India partly because it offers a low-cost and convenient way to make digital payments. The proposed MDR, however, introduces a cost for merchants receiving certain higher-value payments.Who will have to pay the new UPI charge?The key point for consumers is that the MDR is a merchant-side charge. It is not a separate fee that customers will have to pay when they make an eligible UPI payment. The 0.4 percent charge applies to merchant transactions above Rs 2,000. For instance, if a merchant receives Rs 10,000 through an eligible UPI transaction, the MDR would be Rs 40. On a Rs 50,000 payment, it would work out to Rs 200.For transactions of Rs 75,000 or more, the MDR will be capped at Rs 300 per transaction. The government has also said merchants cannot separately pass this MDR on to customers as a UPI payment fee.Most UPI payments will remain freeThe new charge will not cover every UPI transaction. Person-to-person payments will continue to be free, regardless of the amount. UPI payments made to merchants up to Rs 2,000 will also remain free. Small merchants covered by the existing zero-MDR framework will continue to be exempt as well.According to the government, around 96 percent of UPI merchant transactions will remain unaffected by the new MDR. There are still concerns about how some merchants, particularly those operating with thin profit margins, will respond to the additional cost. Some could consider encouraging customers to use other payment methods or changing how transactions are handled.However, the RBI Governor has indicated that the 0.4 percent MDR is not expected to significantly change consumer behaviour or reduce UPI transaction volumes.- Ends