The MDR was scheduled to come into effect on October 15 and is now expected to be deferred until January next year
13 October, 2026 – New Delhi : Amid concerns and criticism over the proposed merchant discount rate (MDR) on UPI payments, the Government on Tuesday decided to defer its implementation on select merchant transactions until after Diwali.
In a statement, the National Payments Corporation of India (NPCI) said, “The UPI and Services Steering Committee today decided that, keeping in mind the festive season, Merchant Discount Rate (MDR) on select Person-to-Merchant (P2M) UPI transactions shall be implemented immediately post Diwali, on a date to be notified separately.”
The MDR was scheduled to come into effect on October 15 and is now expected to be deferred until January next year.
On September 15, the NPCI announced that domestic Unified Payments Interface (UPI) transactions exceeding Rs 2,000 made by customers to merchants would attract a fee of 0.4 per cent from October 15.
The NPCI said UPI transactions between individuals, known as person-to-person (P2P) transactions, would remain free. Small-value UPI transactions below Rs 2,000 would also remain free. These account for more than 95 per cent of the total volume of UPI person-to-merchant transactions, it said.
The Government had said a nominal MDR of 0.4 per cent would be introduced on person-to-merchant UPI transactions above Rs 2,000. For transactions worth Rs 75,000 and above, the MDR would be capped at Rs 300 per transaction.
Facing Opposition criticism over the proposed charge on UPI payments, the Government had argued that the MDR was significantly lower than fees levied on traditional card-based transactions.
“Standard credit card MDRs typically range from 1.5 per cent to 2.5 per cent per transaction, while debit card MDRs are capped up to 0.90 per cent. By setting the baseline UPI MDR at 0.4 per cent on transactions above Rs 2,000 and capping it at Rs 300 for high-value purchases, UPI remains the most affordable digital payment acceptance tool for commercial enterprises. This cost difference helps merchants lower their payment processing expenses while accepting digital transactions,” the Government had said.
Explaining the need for the MDR, the Government had said UPI processes billions of transactions every month and the fee was necessary to enable the ecosystem to invest further in infrastructure resilience, innovation, cybersecurity and customer service.
“MDR is neither a tax nor a charge collected by the Government or NPCI. It is distributed among payment ecosystem participants, including banks and payment application providers, to support the operation and continued expansion of the UPI ecosystem,” the Finance Ministry had explained.
With its September 15 announcement, India had sought to end the zero-MDR regime in place since 2020. Banks and financial institutions had been flagging the system as unsustainable.
The Government had listed three categories of transactions that would not attract the charge: person-to-person transactions, merchant payments of up to Rs 2,000 and payments received by small merchants.
The Tribune