The proposed 0.4% Merchant Discount Rate (MDR) on select UPI transactions above ₹2,000 has been postponed until after Diwali, the National Payments Corporation of India (NPCI) announced on Tuesday, October 13. The fee was originally scheduled to come into effect from October 15, 2026. The revised implementation date will be announced separately. The decision comes ahead of the festive season, when digital payments and consumer spending typically increase.
NPCI Defers MDR Charges Ahead of Festive Season
According to NPCI, the UPI and Services Steering Committee decided to postpone the implementation of MDR on select person-to-merchant (P2M) transactions, keeping the festive season in mind. The delay is expected to give merchants and payment service providers additional time to prepare for the new fee structure.
The proposed charge had raised concerns among retailers and other stakeholders ahead of the busy shopping season. Diwali will be celebrated on November 8 this year, and the new charges are now expected to come into effect after the festival.
Will Customers Have to Pay for UPI Transactions?
The proposed MDR is a merchant-side fee, not a direct charge on customers. Merchants within the applicable categories will pay the fee for eligible transactions exceeding ₹2,000. The postponement means the planned implementation will not begin on October 15 as initially scheduled.
UPI transfers between individuals will continue to remain free, while merchant transactions up to ₹2,000 and transactions covered under the zero-MDR framework for small merchants will also remain unaffected. According to the Finance Ministry, approximately 96% of person-to-merchant UPI transactions will remain outside the new fee framework.
What Happens Next?
The MDR rollout has been proposed as a way to support the long-term sustainability of India's digital payment ecosystem. However, the delay means merchants and payment companies will have to wait for NPCI to announce the new implementation date.
For now, the October 15 rollout has been postponed. Consumers can continue using UPI as before, while the applicable merchant charges remain subject to the revised implementation schedule.