UPI MDR Charges Delayed Until After Diwali, New Date Yet To Be Announced

The National Payments Corporation of India (NPCI) has delayed the implementation of the merchant discount rate (MDR) levy on certain Unified Payments Interface (UPI) transactions till after Diwali. The charges were originally intended to come into effect on October 15, 2026. However, there is no official news regarding the new implementation date as of now. 

The decision follows requests from traders to avoid introducing additional payment costs during the festive shopping season, when businesses typically see higher sales. NPCI's UPI and Services Steering Committee approved the delay on October 13. The organisation will announce the final implementation date separately.

Which UPI Transactions Will Attract Charges

The UPI Steering Committee had fixed an MDR of 0.40 per cent on eligible person-to-merchant (P2M) transactions above Rs 2,000 in September. P2M payments refer to transactions made by customers to businesses, rather than transfers between individuals.

At this rate, a merchant would pay Rs 8 on a transaction of Rs 2,000 and Rs 40 on a payment of Rs 10,000, wherever the applicable rules cover the transaction.

A different fee structure applies to select sectors, including railways, telecommunications, insurance, fuel and agricultural inputs. Eligible transactions above Rs 2,000 in these categories will attract a flat MDR of Rs 5.

The charges will apply to merchants and not directly to customers. Person-to-person (P2P) transfers and most routine merchant payments will remain outside the fee structure.

Why Is UPI MDR Being Introduced

The Centre has argued that UPI needs a sustainable funding model to cover the cost of operating and maintaining its payment infrastructure. These expenses include cybersecurity, fraud prevention, system reliability and customer support.

According to estimates cited in the Finance Ministry's September FAQs, operating UPI costs around Rs 20,000 crore annually. The government has maintained that relying solely on incentives to support the payment network may not be viable over the long term.

The proposed MDR is intended to help cover these operating costs by collecting fees on certain transactions. However, the change has also raised concerns regarding the additional burden on businesses that depend heavily on online payments.

How Does The Delay Impact Businesses And Customers

The delay provides a breather to the merchants and payment service providers to buckle up for the new structure. During this window, businesses can review their payment systems, point out which transactions can attract MDR, and look into how the new fees may impact their operational costs.

Kunal Jhunjhunwala, founder, airpay, said, "Keeping costs and processes steady during this period lets businesses focus on serving their customers...The extra time also helps merchants, especially those handling higher-value sales, understand how MDR will apply to them and prepare with their payment partners."

"As the new date approaches, clear communication across banks and payment providers will help merchants and customers move through this transition with confidence," he added.

Not all customers, on the other hand, will be directly levied MDR under the proposed rules. The impact will solely depend on the actual amount being transacted and the receiver of the payment. 

FAQs

1. What Is UPI MDR?

UPI Merchant Discount Rate (MDR) is a fee merchants pay for processing eligible digital payments.

2. Why Has NPCI Delayed The UPI MDR Rollout?

NPCI postponed the rollout to avoid adding payment-related costs and confusion during the festive shopping season.

3. When Will The UPI MDR Charges Be Implemented?

The charges are expected to take effect in the second week of November, after Diwali. NPCI will announce the final date separately.

4. Will UPI MDR Charges Apply To All Transactions?

No. The proposed charges apply to eligible person-to-merchant UPI transactions above Rs 2,000. Person-to-person transfers and most everyday merchant payments are excluded.