Major relief for shopkeepers: MDR charges on UPI will not be applicable from October 15..
UPI MDR Charge: The implementation of new UPI Merchant Discount Rate (MDR) rules, originally scheduled for October 15, 2026, has been postponed until after Diwali. On October 13, the National Payments Corporation of India (NPCI) issued a press note clarifying that no new charges would be levied on UPI transactions for the time being. Plans were in place to impose a 0.4% Merchant Discount Rate (MDR) on UPI payments exceeding ₹2,000, effective this Thursday; however, this has now been deferred until after Diwali.
The NPCI operates UPI, the country's largest digital payment platform. In its statement, the organization noted that the imposition of charges on Person-to-Merchant (P2M) transactions has been put on hold in light of the festive season. A new date will be announced later; it is anticipated that a fresh decision regarding this matter could be reached in the second week of November, following Diwali.
**Major Reprieve During the Festive Season**
Merchant bodies and fintech companies alike had strongly opposed the new charge, arguing that it would directly impact sales during the festive season—a time when the market is already grappling with inflation. The government was also concerned that business costs might rise during festive sales. If the MDR burden on merchants increases, ordinary customers could ultimately bear the cost in some form, as merchants would likely pass the expense on to them.
In response to these concerns, the UPI steering committee has decided to hold off on the move for now. A Moneycontrol report dated October 8 had previously indicated that the NPCI was considering a proposal to defer the implementation of the MDR until January 2027.
Understanding the Mechanics of MDR Charges
Just last month, the UPI Steering Committee decided that an MDR (Merchant Discount Rate) of 0.4% would apply to transactions exceeding ₹2,000. This means that if you make a payment of ₹2,000 to a merchant via UPI, the merchant would have to pay a fee of 0.4% of that amount. For a payment of ₹10,000, this fee would amount to ₹40. This fee is charged to merchants in exchange for processing digital payments. On October 8, the Finance Minister clarified that stakeholders would resolve the issue of MDR on UPI transactions among themselves. The decision regarding when to implement the charge has been left to the payments ecosystem.
UPI Charges Are More Complex Than Card Charges
Levying charges on UPI is not a straightforward matter. Card-based payments take place at approximately 11 million (1.1 crore) terminals across the country, whereas the UPI network is far more extensive. Around 100 million (10 crore) merchants nationwide accept payments via UPI, ranging from those in small towns to those in villages. While rules for card-based payments are largely uniform, different rates have been set for various categories of UPI transactions.
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