The National Payments Corporation of India (NPCI) has postponed the planned implementation of Merchant Discount Rate (MDR) charges on select Unified Payments Interface (UPI) transactions above ₹2,000 until after Diwali 2026.

The change was originally scheduled to take effect on October 15. The decision to delay the rollout is intended to give merchants and payment service providers more time to prepare during the busy festive shopping season. NPCI will announce the revised implementation date separately.

What Are the Proposed UPI Charges?

Under the proposed framework, an MDR of 0.4% would apply to eligible merchant transactions above ₹2,000, subject to a maximum charge of ₹300 per transaction. The fee is intended to support the costs of operating and maintaining India's digital payments infrastructure.

MDR is a fee associated with processing merchant payments. It is paid by eligible merchants rather than being a direct transaction charge imposed on customers.

The framework also provides exemptions for person-to-person transfers and eligible small merchants. Payments to merchants of ₹2,000 or less remain outside the proposed charge structure. The government has stated that approximately 96% of merchant UPI transactions will remain unaffected.

Why Has the Implementation Been Delayed?

The postponement comes ahead of Diwali, a major shopping period for Indian retailers. Merchants and industry associations raised concerns about introducing additional payment-processing costs during a time when transaction volumes typically increase.

The delay provides businesses and payment providers with additional time to prepare their systems and operational processes. It also gives industry stakeholders more time to discuss how the proposed fee structure could affect different categories of merchants.

Will Customers Have to Pay More for UPI?

The proposed MDR is a merchant-side fee, not a direct charge on customers for making UPI payments. The government has previously stated that the fee should not be passed on to consumers as a separate transaction charge.

However, any indirect impact on prices would depend on how individual businesses manage their operating costs. Customers should not assume that every UPI payment above ₹2,000 will automatically attract an additional charge.

What This Means for India's Digital Payments Industry

UPI has become a major part of India's retail and peer-to-peer payment ecosystem. Changes to its pricing structure could affect merchants, payment applications, banks, and payment infrastructure providers.

For merchants, the proposed framework raises questions about payment-processing costs and profit margins. For payment companies, MDR could provide a revenue stream to support the continued operation and expansion of payment services.

The postponement also highlights the challenge of balancing the financial sustainability of digital payment infrastructure with the need to keep digital transactions accessible and affordable.

Key Takeaway

NPCI has deferred the proposed MDR rollout on eligible UPI merchant transactions above ₹2,000 until after Diwali 2026. The revised date is yet to be announced.

For now, the key distinction is that the proposed fee applies to eligible merchant transactions, not ordinary person-to-person UPI transfers. Businesses should monitor official NPCI announcements for the final implementation date and applicable rules.