The Unified Payments Interface (UPI) merchant discount rate (MDR) is scheduled to apply to some transactions above ₹2,000 from 15 October 2026, but merchant organisations, fintech companies and payment firms have asked the National Payments Corporation of India (NPCI) to defer the rollout until January 2027.
According to Aaj Tak Business, the request has reached NPCI as the industry seeks more time to prepare for different rates, policies and applicability thresholds across UPI payment categories. Discussions on the issue are also reportedly under way with the Finance Ministry. NPCI may take a decision within the next two days, the report said, citing sources.
The UPI Steering Committee had decided last month that a 0.4% MDR, equivalent to 40 basis points, would apply to certain transactions above ₹2,000. MDR is the fee paid by a merchant for processing a digital payment to the relevant bank or other participants in the payment system. At a rate of 0.4%, a ₹2,000 transaction would attract a fee of ₹8, while a ₹10,000 transaction would attract ₹40.
The central issue for payment companies and merchants is that the applicable categories and rates have not been fully clarified, according to the report. Unlike card payments, which generally operate through merchant categories and relatively standardised MDR arrangements, UPI has separate rules for different types of transactions.
The categories cited in the report include utility bills, loan instalments and capital-market-related payments. Industry participants have sought greater clarity on how these transactions should be classified and which rates should apply. Some payments that are now made through UPI were previously handled through net banking, IMPS, NEFT or RTGS, each of which had its own fee arrangements.
Loan repayments are among the areas where questions remain. In some cases, an automatic debit may fail because a customer does not have sufficient funds in the account at the scheduled time. The customer may then make the instalment payment manually. The report said the industry is seeking clarity on whether such a manual payment should be treated as a financial-institution payment attracting 0.4% MDR. NPCI has also specified a flat fee of ₹5 for such payments, creating an additional classification question for banks and payment aggregators.
Capital-market participants have raised a separate concern over transfers into brokerage accounts. Their position, as reported by Aaj Tak Business, is that such payments resemble person-to-person transfers and should not attract MDR because the brokerage company does not directly earn from the transaction.
The proposed 15 October implementation also falls during the festive shopping period. Merchant bodies and payment-industry organisations have reportedly asked NPCI to postpone the change until the festive season ends, arguing that additional transaction costs could affect businesses during a period of heightened sales. The report also noted concerns that some merchants could attempt to pass the cost on to customers.
If NPCI does not change the schedule, eligible UPI merchant payments above ₹2,000 will be subject to MDR from 15 October under the stated rules. If the request is accepted, the implementation would be deferred until January 2027, giving merchants, banks and payment companies additional preparation time. NPCI’s decision is expected to determine whether the current deadline remains in force.
