In a relief to users ahead of the festive season, the National Payments Corporation of India (NPCI) on Tuesday deferred the implementation of the Merchant Discount Rate (MDR) on select UPI transactions, just two days before it was due to come into effect on October 15. The NPCI said the levy would now be implemented after Diwali on a date to be notified separately.The decision postpones the rollout of a 0.4 per cent MDR on select person-to-merchant (P2M) UPI transactions above Rs 2,000, a move aimed at creating a sustainable revenue framework for the digital payments ecosystem.“UPI and Services Steering Committee today decided that, keeping in mind the festive season, the MDR on select P2M UPI transactions shall be implemented immediately post Diwali at a date to be notified separately,” the NPCI said in a statement.The deferment follows representations from merchant associations, fintech firms and payment companies, which had sought more time citing concerns over consumer sentiment during the festive sales season, differing MDR rates and uncertainty around the levy’s applicability across various UPI transactions.The Confederation of All India Traders (CAIT) welcomed the move, calling it a timely decision during the festive and wedding season when traders and MSMEs depend on higher business volumes. It said additional transaction costs could have strained merchants operating on thin margins and discouraged wider adoption of digital payments.While the implementation date has been pushed back, the MDR structure would remain unchanged, according to sources. MDR is a fee paid by merchants to banks and payment service providers for processing digital transactions.Under the framework announced by the NPCI, a 0.4 per cent MDR, capped at Rs 300, will apply to specified merchant UPI transactions above Rs 2,000. Certain categories, including bill payments, fuel purchases and education fees, will attract a flat charge of Rs 5 per transaction above the threshold. Capital market transactions such as mutual fund and stockbroking payments will be charged a lower MDR of 0.02 per cent, also subject to a Rs 300 cap.The decision comes amid political criticism, with Opposition parties describing the levy as a tax that could ultimately burden consumers. Retail traders’ groups had also planned a nationwide “No UPI Day” protest on October 2, but later withdrew it after meeting Union Finance Minister Nirmala Sitharaman last month.Ahead of the October 15 rollout, there had been speculation that implementation could be pushed to January 1. The NPCI’s clarification, however, indicates the levy will come into force shortly after Diwali.UPI continued its rapid growth in September, recording an average 802 million transactions a day with an average daily transaction value of Rs 97,913 crore. Monthly transaction volume rose 22.6 per cent year-on-year to 24.07 billion, while the total value of transactions increased 18 per cent to Rs 29.37 trillion. On a sequential basis, transaction volume was down 1.8 per cent from August, partly because September had 30 days compared with 31 in August.