New Delhi, October 13, 2026: The National Payments Corporation of India (NPCI) has postponed the proposed rollout of a 0.4% Merchant Discount Rate (MDR) on select UPI merchant transactions above ₹2,000 until after Diwali. The charge was scheduled to take effect on October 15 but has been deferred following concerns raised by merchant groups and amid preparations for the festive shopping season.
UPI Fee Rollout Deferred Beyond October 15
Under the revised timeline, the MDR on eligible person-to-merchant UPI transactions will be introduced after Diwali, with NPCI expected to announce the new implementation date separately.
The decision delays the rollout but does not cancel the proposed fee structure. Merchants and payment-system participants will have additional time to prepare for the changes.
Proposed 0.4% MDR on Select Payments Above ₹2,000
Under the proposed framework, eligible UPI merchant payments exceeding ₹2,000 will attract an MDR of 0.4%, subject to a maximum charge of ₹300 per transaction.
Transactions up to ₹2,000 and person-to-person transfers are expected to remain outside the proposed charge structure. The fee will apply only to specified merchant-payment categories, rather than every UPI transaction.
Consumers Not Expected to Pay the Fee Directly
The Merchant Discount Rate is a transaction-processing fee associated with payments accepted by merchants.
Under the proposed framework, the MDR is intended to be borne by merchants and relevant payment-system participants rather than charged directly to customers. Merchants will not be permitted to pass the fee on to consumers.
Retailer Associations Raise Concerns
Merchant organisations had opposed introducing the charge immediately before the festive shopping season, arguing that additional payment-processing costs could affect retailers during a period of heightened consumer spending.
The All India Mobile Retailers Association and the All India Consumer Products Distributors Federation were among the industry bodies that sought a postponement and raised concerns about the proposed framework.
‘No UPI Day’ Protest Had Been Proposed
Some trader groups had earlier proposed observing a “No UPI Day” on October 2 to protest against the planned charges.
The proposed protest was subsequently withdrawn after representatives met Finance Minister Nirmala Sitharaman and discussed their concerns over the MDR framework.
Festive Season Influences Timing
The postponement comes as businesses prepare for the Diwali shopping rush. The delay is intended to avoid introducing the proposed fee during a particularly busy period for retailers and to provide additional time for operational and technological preparations.
The decision also gives merchants and payment companies more time to understand the proposed arrangements before implementation.
Special Transaction Categories May Have Different Rates
The proposed framework includes different charges for certain categories of transactions.
Essential services such as railways, telecommunications, fuel and insurance are expected to face a flat fee of ₹5 for qualifying transactions above ₹2,000, while certain capital-market transactions are expected to attract a lower rate of 0.02%.
The applicable charge will depend on the transaction category and the conditions specified under the framework.
Most UPI Merchant Transactions Expected to Remain Free
The proposed MDR is expected to affect only a portion of UPI merchant payments. According to reports, more than 95% of merchant UPI transactions by volume are expected to remain free because most fall below the applicable threshold or qualify for exemptions.
The proposed changes are therefore aimed at specified transaction categories rather than the entire UPI payment ecosystem.
UPI Continues to Record Strong Transaction Volumes
UPI remains India’s leading digital-payment platform, processing billions of transactions each month.
In September, the platform recorded approximately 24.07 billion transactions worth ₹29.37 trillion, averaging around 802 million transactions daily. The scale of these transactions highlights the importance of maintaining a sustainable payment infrastructure as digital-payment usage expands.
Why NPCI Is Considering MDR
The proposed MDR is intended to help support the costs associated with India’s expanding digital-payment infrastructure. Revenue from transaction-processing charges could contribute towards merchant expansion, payment technology, transaction infrastructure and fraud-prevention measures.
However, the proposal has prompted debate over how to balance the operating costs of digital payments with merchants’ preference for low-cost payment acceptance.
Fee Delayed, Not Cancelled
NPCI’s latest decision represents a postponement rather than a withdrawal of the proposed MDR framework. The new implementation date is yet to be announced, and the applicable charges will depend on the final rollout arrangements.
Until further clarification, merchants and payment companies will be awaiting details of the revised timeline and the requirements for eligible transactions.
Source: NPCI, Reuters, Business Standard, The Economic Times, Moneycontrol
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