National Payments Corporation of India Postpones UPI Merchant Discount Rate Rollout to After Diwali

Key facts

• The National Payments Corporation of India (NPCI) has deferred the implementation of Merchant Discount Rate (MDR) on select person-to-merchant (P2M) UPI transactions until immediately after Diwali, with the exact date to be notified separately; the decision was taken by the UPI and Services Steering Committee on October 13, 2026, considering the festive season.
• Under the framework announced in September 2026, an MDR of 0.4% will apply to specified merchant transactions above Rs 2,000, capped at Rs 300 for transactions of Rs 75,000 and above, while transactions up to Rs 2,000 remain free.
• For essential sectors including railways, telecommunications, insurance, fuel, utilities and education, a flat MDR of Rs 5 will apply to transactions above Rs 2,000.
• Person-to-person (P2P) UPI transfers will remain free irrespective of amount, and small merchants receiving up to Rs 1 lakh per month through UPI QR codes will continue to be exempt under the zero-MDR framework.
• Approximately 96% of all P2M transactions will remain unaffected by the MDR framework, and MDR is a fee shared among banks and payment providers, not a tax collected by the government or NPCI.
• The new MDR framework was originally scheduled to take effect from October 15, 2026, and the deferral delays but does not scrap the proposed charges; merchants cannot pass on the MDR to customers as a separate UPI charge.