NPCI defers 0.4% UPI merchant fee rollout on >₹2,000 transactions until after Diwali

The National Payments Corporation of India (NPCI) has deferred the implementation of the 0.4 percent Merchant Discount Rate (MDR) on select Person-to-Merchant (P2M) UPI transactions over Rs 2,000, which was originally scheduled to take effect on October 15. Following a trade delegation meeting with Finance Minister Nirmala Sitharaman and pushback from the opposition, the NPCI announced that a new rollout date will be decided after Diwali, providing timely relief to merchants and MSMEs during the festive season.

While the charges were scheduled to take effect on October 15, the NPCI said its implementation was deferred ‘keeping in mind the festive season’.

<p>The National Payments Corporation of India has postponed the implementation of a 0. 4 per cent Merchant Discount Rate on sele</p>

The decision comes just two days before the proposed implementation of the revised MDR framework on 15 October, providing additional time for banks, payment service providers and merchants to prepare for the new charging structure.

MDR charges on select Person-to-Merchant UPI transactions above ₹2,000 will not start on 15 October as planned. Here's what we know about the new date.

Merchant Discount Rate (MDR) on select Person-to-Merchant UPI transactions shall be implemented post-Diwali immediately on a date to be notified separately, says NPCI

Mumbai: The introduction of merchant discount rate (MDR) on select UPI merchant payments has been deferred until after Diwali, giving merchants and payment companies more time to prepare for the first significant pricing change in India’s largest digital payments network.The UPI and Services Steering Committee on Tuesday decided that, keeping in mind the festive season, the levy on select person-to-merchant (P2M) transactions will be implemented immediately after Diwali. The exact date will be notified separately.The charge was earlier scheduled to take effect from October 15.Also Read: MDR a small fee, will not have major impact on UPI volumes: RBI Guv MalhotraUnder the new framework, a 40-basis-point MDR will apply to eligible bank account-to-merchant UPI transactions above Rs 2,000, while smaller transactions and exempt merchant categories will continue to remain outside the levy.More than 95% of UPI merchant-payment transactions by volume are expected to remain free, limiting the charge largely to higher-value transactions. In value terms, industry estimates suggest a significantly larger share of transactions will attract MDR because payments above Rs 2,000 account for a sizeable portion of merchant-payment value.The introduction of MDR marks a shift from the zero-MDR framework under which merchants have not been charged for accepting bank account-based UPI payments. The government had instead compensated banks and payment companies through an incentive scheme for low-value UPI and RuPay debit-card transactions.Also Read: UPI vs debit vs credit cards: Will UPI payments with MDR charges still be cheapest?The government has budgeted about Rs 2,000 crore for UPI and RuPay incentives in FY27, significantly below the estimated cost of operating the UPI ecosystem. No subsidy has been paid since April 2025. Earlier payouts stood at Rs 3,631 crore in FY24 and Rs 1,046 crore in FY25.NPCI chief executive Dilip Asbe had recently said the UPI ecosystem costs about Rs 21,000 crore annually to operate and that the 40-bps charge could help recover around Rs 13,000-15,000 crore in the first year.Under the proposed revenue-sharing arrangement, issuing banks are expected to receive 16 basis points of the 40-bps MDR, while acquiring banks will receive about 12 basis points. The balance will be distributed among consumer-facing applications and payment service providers involved in processing the transaction.Banks and payment companies expect the revenue stream to support greater spending on technology infrastructure, fraud prevention and capacity as UPI transaction volumes continue to expand rapidly. It could also support newer use cases including B2B collections, delegated payments and agentic transactions.The authorities have sought to minimise the impact on small merchants and consumers. RBI Governor Sanjay Malhotra had said earlier this month that he did not expect the introduction of a small fee to materially affect transaction volumes.Industry executives have also argued that a large part of the transaction value that will attract MDR comes from merchants already accepting credit cards and other paid payment instruments, reducing the likelihood of a significant disruption to UPI usage.The latest decision therefore changes the timing rather than the structure of the MDR framework, with the levy now set to kick in after the festive shopping season ends.

The 0.4% charge for ‌merchants on transactions exceeding ₹2,000 was scheduled ‌to take effect ​on October 15

Big Change For UPI Users: According to the Centre, the proposed MDR is intended to help fund UPI infrastructure, which costs Rs 20,000 crore annually.

The government has announced a delay in implementing the Merchant Discount Rate for Unified Payments Interface transactions, pushing back the launch initially scheduled for October 15 to after Diwali. This postponement aims to avoid potential payment disruptions amid the festive shopping surge, allowing payment companies additional preparation time for the upcoming changes. This initiative was expected to generate new revenue streams for these companies.

The National Payments Corporation of India (NPCI) has deferred the introduction of merchant discount rate (MDR) on select UPI person-to-merchant…

Mumbai: The National Payments Corporation of India (NPCI) has decided to defer the implementation of Merchant Discount Rate (MDR) on select Unified Payments Interface (UPI) merchant transactions until after Diwali, providing temporary relief to merchants during the festive season.The decision was taken by the UPI and Services Steering Committee on Tuesday, October 13, considering the ongoing festive shopping period.MDR Implementation Post DiwaliAccording to NPCI's official communication, MDR on select Person-to-Merchant (P2M) UPI transactions will now be implemented immediately after Diwali.However, the exact implementation date has not been announced. NPCI said the date would be notified separately.The announcement comes ahead of the festive shopping period, when digital transactions typically increase across retail stores, online platforms and other merchant establishments.What Does MDR Mean?Merchant Discount Rate is a fee generally charged to merchants for processing digital payment transactions.The proposed implementation covers select P2M transactions rather than all UPI payments.NPCI's latest communication does not specify the applicable MDR rates, transaction thresholds or categories of merchants that would come under the revised framework. UPI Payments To Get Costlier? Here's What New MDR Rules Mean For Google Pay, PhonePe And Paytm UsersThese details will require further clarification through subsequent official notifications.What Changes For Merchants?The postponement means merchants covered by the proposed framework will not face the new MDR implementation during the festive period.For businesses accepting UPI payments, the decision provides additional time to prepare for possible changes in transaction processing costs.However, the financial impact will depend on the final implementation guidelines.NPCI To Announce New DateNPCI operates India's retail payments and settlement infrastructure, including UPI, which supports digital transactions between individuals and businesses.The organisation works with banks and payment service providers to strengthen digital payment systems nationwide. UPI MDR Explained: Why Pneucons Says New Payment Charge Could Eat 94% Of Its MarginsThe latest decision signals a temporary postponement rather than withdrawal of the proposed MDR framework.Merchants and payment service providers will now await the official notification confirming the revised implementation date and applicable conditions.

The revised merchant discount rate framework for select UPI transactions will take effect on a date to be announced separately, with the payments body citing the festive season.

UPI fee on merchant transactions above Rs to be implemented after Diwali