The rollout of merchant discount rates (MDR) on select UPI payments has been deferred until immediately after Diwali, allowing merchants to continue accepting the affected transactions without the new charge during the festive season. The implementation date will be notified separately.
The decision was taken by the National Payments Corporation of India’s UPI and Services Steering Committee, according to a report by The Times of India. The committee cited the festive season for postponing the rollout, which had been scheduled to begin on October 15.
The MDR framework, approved and notified by NPCI on September 15, proposed a 0.4% charge on eligible person-to-merchant UPI transactions above Rs 2,000. The charge would be capped at Rs 300 for transactions of Rs 75,000 and above. Banks, payment aggregators and other participants in the UPI ecosystem had been given a month to make the required operational changes before the planned implementation.
The deferment comes after trade bodies and merchant associations sought a January rollout. They argued that introducing a transaction fee during the festive period could raise business costs at a time when retail activity and digital payments typically increase. The associations also expressed concern that higher payment costs could affect sales during one of the most important consumption periods of the year.
The proposed framework was intended to create a revenue stream for the payments ecosystem after more than six years of effectively zero MDR on UPI transactions. The government had indicated that the levy would apply only to specified merchant transactions. Payments up to Rs 2,000 and transactions by eligible small merchants were expected to remain free.
According to the report, about 96% of person-to-merchant UPI transactions were expected to remain unaffected by the framework. The proposed charge was therefore aimed at a limited segment of higher-value merchant payments rather than the wider base of everyday UPI use.
For urban retailers, restaurants, service providers and other businesses that increasingly rely on digital payments, the deferment removes the immediate need to adjust payment systems or account for the proposed fee during the festive trading period. Payment companies and banks also receive additional time to prepare for the operational changes required under the framework.
The postponement follows an earlier expectation that implementation could be pushed to January 2027 from October 15. However, the committee’s announcement stated that the rollout would take place immediately after Diwali instead. The government and NPCI are expected to notify the revised implementation date separately.
