UPI MDR charges will not kick in on October 15 as earlier planned. In a major relief for merchants and shoppers ahead of the festive season, the National Payments Corporation of India (NPCI) on Tuesday, October 13, 2026, deferred the rollout of the Merchant Discount Rate on select person-to-merchant (P2M) UPI transactions until immediately after Diwali, with the exact date to be notified separately.
What Are UPI MDR Charges?
MDR, or Merchant Discount Rate, is the fee charged to merchants for processing digital payments. Under the framework announced last month, NPCI fixed the rate at 0.4 per cent — 40 basis points — on eligible P2M UPI transactions above Rs 2,000, capped at Rs 300 per transaction. In simple terms, a merchant would pay Rs 8 on a Rs 2,000 payment and Rs 40 on a Rs 10,000 payment made via UPI. The charge is payable by the merchant, not the customer — our earlier breakdown of who pays the 0.4% MDR and who doesn’t explains the original plan in detail.
The introduction of UPI MDR charges marks a shift from the zero-MDR regime in place since 2020, when the government removed the fee to accelerate digital payment adoption.
Which Transactions Will Attract MDR After Diwali
Not every UPI payment will carry the charge. Person-to-person transfers and all merchant payments up to Rs 2,000 remain completely exempt, as do eligible small merchants receiving less than Rs 1 lakh a month through UPI. Transactions above Rs 2,000 make up only about 4 per cent of P2M payments by volume, though they account for nearly two-thirds of their total value, according to industry data cited in reports. Capital market transactions will attract a lower rate of 0.02 per cent, while certain public services — including railway tickets, fuel, utility bills, insurance premiums and tax payments — will carry a flat Rs 5 fee on transactions above Rs 2,000.
Why NPCI Deferred the Rollout
The deferral follows strong pushback from trader bodies. The Confederation of All India Traders (CAIT), the All India Mobile Retailers Association (AIMRA) and the All India Consumer Products Distributors Federation (AICPDF) had warned that introducing the fee just before Diwali could hurt consumer sentiment during peak festive sales and erode retailer margins. AIMRA and AICPDF had even called for a ‘No UPI Day’ protest on October 2, which they withdrew after meeting Finance Minister Nirmala Sitharaman on September 30.
Government sources told The Hindu that the final call to defer the rollout was taken in the Prime Minister’s Office following appeals from traders. The government is also reported to fear that merchants could pass the MDR cost on to consumers in some form at a time when inflation is rising — a concern that made the festive-season timing particularly sensitive.
What Changes for Users
For ordinary users, nothing changes — and that is the key takeaway. NPCI has made it clear that the MDR is payable by merchants, not consumers, and person-to-person transfers are fully exempt regardless of amount. Your daily UPI payments for groceries, cab rides, food delivery and small purchases below Rs 2,000 will continue exactly as before, with no extra charge.
Retailer associations have cautioned that some merchants might nudge prices up or discourage UPI for large bills to offset the new cost, though the government has assured customers they will not bear the burden.
For context on India’s fast-changing payments landscape, see Apple Pay’s India launch ahead of the UPI MDR rollout and how the digital rupee differs from UPI.
What Changes for Merchants
Merchants get a breather through the festive season. With Diwali falling on November 8, 2026, businesses can run their biggest sale weeks without factoring in the 0.4 per cent charge. Once implemented, medium and large merchants accepting UPI payments above Rs 2,000 will pay the fee, capped at Rs 300 per transaction — meaning the maximum hit applies on transactions of Rs 75,000 and above. Small merchants receiving less than Rs 1 lakh a month via UPI stay exempt. The payments industry, which estimates its annual operating costs at around Rs 20,000 crore, has long demanded the fee; industry estimates suggest the proposed structure could generate roughly Rs 15,000 crore a year.
What Happens After Diwali
NPCI has not fixed the new date — it will be “notified separately,” and earlier reports had suggested the rollout could even slip to January 2027, though the official line is “immediately post Diwali,” as also noted in The Hindu BusinessLine’s October 14 morning report.
The Supreme Court has also stepped in, directing NPCI, the Union government and the Reserve Bank of India to file affidavits by late October explaining the rationale for imposing the UPI MDR charges on specified transactions. Between the court scrutiny, the pending date notification and the possibility of further tweaks — such as exempting businesses with annual turnover up to Rs 40 lakh, an idea reportedly under consideration — merchants should treat the current framework as a draft, not a done deal.
Frequently Asked Questions
Which UPI transactions will attract MDR after Diwali?
Only select person-to-merchant (P2M) transactions above Rs 2,000 at medium and large merchants. The fee is 0.4%, capped at Rs 300 per transaction. Capital market transactions carry a lower 0.02% rate, while railway tickets, fuel, utility bills, insurance premiums and tax payments above Rs 2,000 carry a flat Rs 5 fee.
When will UPI MDR charges actually start?
NPCI has only said "immediately post Diwali" — Diwali 2026 falls on November 8 — with the exact date to be notified separately. The rollout was originally scheduled for October 15, 2026.
Are small merchants exempt from UPI MDR?
Yes. Merchants receiving less than Rs 1 lakh a month through UPI are exempt, and all transactions up to Rs 2,000 are exempt regardless of merchant size.
Why did NPCI defer the MDR rollout?
Trader bodies including CAIT, AIMRA and AICPDF protested the pre-Diwali timing, warning it could hurt consumer sentiment during festive sales and erode retailer margins. Government sources told The Hindu the final deferral call was taken in the Prime Minister's Office.
Could merchants charge customers extra to cover MDR?
Retailer associations have cautioned that some merchants might nudge prices up or discourage UPI for large bills. However, the government has assured that customers will not bear the burden of MDR. If a merchant adds a surcharge specifically for UPI payments, you can raise it with the payment provider or a consumer forum.
