UPI MDR: The 0.40% merchant discount rate (MDR) on UPI transactions above ₹2,000 has been pushed and will come into effect after Diwali, the NPCI said in a statement today.
Notably, this comes amid a number of trader unions and groups urging the government to remove the new charge, which was due to come into effect from 15 October. Used by over 50 crore people, Alphabet’s Google Pay and Walmart’s PhonePe held around 80% of market share by value of UPI transactions in August, as per a Reuters report.
What Did NPCI Say?
“UPI and Services Steering Committee today decided that, keeping in mind the festive season, MDR on select Person-to-Merchant (P2M) UPI transactions, shall be implemented immediately post Diwali at a date to be notified separately,” the statement read.
Consideration for festive season, says NPCI
The NCPI in a statement said that the postponement comes as consideration of the festive period. Notably, Diwali 2026 will be celebrated across India on November 8. Diwali marks a period of extended festivities, with shoppers expected to spend on clothes, cars, gold and home appliances during the auspicious time.
October to December is considered as the “festive” period in India due to a number of religious and regional festivals including Durga Puja, Dussehra, Diwali, Christmas and New Year.
It remains to be seen when the UPI MDR charge will come into effect as no subsequent later date was mentioned in the NPCI statement.
CAIT welcomes deferment of UPI MDR
The Confederation of All India Traders (CAIT) in a statement welcomed the Centre’s decision to defer the proposed MDR charges on UPI transactions. National general secretary Praveen Khandelwal called the decision “timely and pragmatic, particularly during the crucial festive and wedding season, when millions of traders and MSMEs depend on higher business volumes”.
“Additional transaction costs could have placed an avoidable burden on merchants operating on thin margins and discouraged the wider acceptance of digital payments,” he added.
“We sincerely thank Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman for understanding the concerns of traders and taking a positive decision. CAIT supports digital payments, but the system must remain affordable and sustainable for merchants, especially small businesses. This deferment will strengthen traders’ confidence and reinforce the Government’s partnership with the trading community in building a stronger Digital India,” he said in the statement.
UPI MDR: What was imposed?
The NPCI in an announcement has month said that MDR would apply on person-to-merchant (P2M) UPI payments, above ₹2,000, with effect from 15 October 2026, under a revised UPI MDR framework.
The rules kept UPI free for all customer (person-to-person / P2P) transactions, 95% of low-value UPI transactions below ₹2,000 and small merchant transactions (P2PM) completely free. It also proposed a new fund to support the expansion of UPI acceptance among small merchants.
The finance ministry had in September said that this framework has been introduced under the Payment and Settlement Systems Act, 2007, following “detailed deliberations by the UPI Steering Committee on the applicable rates, operational arrangements and consumer safeguards”.
“Revenue generated from larger merchant transactions will support banks, payment service providers and UPI application providers in expanding and improving payment infrastructure, including in rural and semi-urban areas,” it added.
What are the slabs for UPI MDR charge?
Flat MDR of ₹5 per transaction will apply to UPI payments above ₹2,000 in specified merchant categories — essential and thin-margin sectors — such as railways, telecom services, insurance, fuel and agricultural inputs.
MDR of 0.4% applicable on P2M UPI transactions above ₹2,000.
For transactions of ₹75,000 and above, the MDR will be capped at ₹300 per transaction.
Payments relating to mutual funds, securities, stockbrokers and dealers will attract an MDR of 0.02%, capped at ₹300 per transaction.