The rollout of the Merchant Discount Rate on UPI transactions above two thousand rupees may be delayed until January after retail traders requested the NPCI for more time to prepare, triggering a sharp decline in fintech stocks.

The rollout of the Merchant Discount Rate on UPI transactions above two thousand rupees may be delayed until January after retail traders requested the NPCI for more time to prepare, triggering a sharp decline in fintech stocks.

The rollout of the Merchant Discount Rate on UPI transactions above two thousand rupees may be delayed until January after retail traders requested the NPCI for more time to prepare, triggering a sharp decline in fintech stocks.

The Merchant Discount Rate (MDR) that was set to apply to person-to-merchant transactions above ₹2,000 from October 15 may be delayed until January. Business Standard reported that the Retail traders' association requested the National Payments Corporation of India (NPCI) to postpone implementation in order to prepare for the new policy. The NPCI is expected to make the final decision in the coming days.

Following the report, shares of Paytm’s parent company, One 97 Communications Ltd, fell 10 per cent in Thursday’s early morning trade session. Shares of other fintech companies also tumbled. One Mobikwik Systems shares were down 8 per cent, Pine Labs by roughly 4 per cent and AvenuesAI by around 2 per cent.

Fintech shares were rallying earlier, when the Centre announced the new policy, as the fee was to be divided between the acquiring bank, issuing bank and the third-party application provider (TTAP). 

Especially for Paytm, UPI person-to-merchant transactions accounted for 85 per cent of its gross merchandise value (GMV), of which 35 per cent was eligible for the MDR fee. 

Why is the UPI MDR rollout facing resistance?

The retail traders association had initially planned a “No UPI day” protest on October 2 against the proposed fee, but called off the strike after meeting the Union Finance Minister Nirmala Sitharaman last month. On September 28, the Supreme Court refused to stay the Centre’s decision to impose MDR. 

The traders association argues that implementing a 0.4 per cent fee on transactions above ₹2,000 right before the start of the festive season might affect festive sales volumes. 

Payment aggregators, banks and merchants also requested time to understand the different transaction categories. Categories including bill payments, utilities, education and fuel will attract a flat fee of ₹5 per transaction above ₹2,000. The 0.4 per cent charge is capped at ₹300 for transactions above ₹75,000. Small merchants with a ₹1 lakh monthly revenue and person-to-person transactions continue to attract zero MDR. 

Business Standard cited sources that the fee is likely to be postponed till the festive season ends after members of the UPI Steering Committee, headed by the NPCI, discussed the issue on Wednesday.