Last month, the Government of India announced a new framework that brings back the Merchant Discount Rate (MDR) on select UPI payments. We explained how the new UPI charges work in detail. Now, NPCI has deferred the MDR charges, which were set to kick in on October 15, 2026.
NPCI Delays UPI MDR Till After Diwali 2026
The National Payments Corporation of India (NPCI) has put the MDR on hold just two days before it was due to start. In an official press release issued from Mumbai on October 13, 2026, NPCI said:
UPI and Services Steering Committee today decided that, keeping in mind the festive season, Merchant Discount Rate (MDR) on select Person-to-Merchant (P2M) UPI transactions, shall be implemented immediately post Diwali at a date to be notified separately.
So, the MDR is only delayed, not cancelled. NPCI hasn’t shared a new date yet. The press release also doesn’t mention any changes to the charges. According to a source quoted by Business Standard, the MDR structure will stay the same.
For context, MDR is a fee that merchants pay to banks and payment companies for processing digital payments. The Finance Ministry has said that MDR is “neither a tax nor a charge collected by the Government or NPCI.”
Instead, the fee is shared among banks, payment apps and other players in the UPI ecosystem. The good news is that most UPI users will not be affected directly. P2P transfers to friends and family stay free. Payments of Rs 2,000 or less, which make up over 95% of P2M transactions, are also free. The fee is charged to merchants, not to customers.
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UPI MDR Charges Set to Go into Effect
NPCI’s latest press release only changes the timeline and has no indication of revised MDR charges. Here’s the MDR structure announced last month:
| Transaction Type | Charge |
|---|---|
| P2M payments above Rs 2,000 | 0.4% MDR |
| P2M payments of Rs 75,000 and above | Capped at Rs 300 |
| Essential sectors (railways, telecom, utility bills, insurance, fuel, education and more) above Rs 2,000 | Flat Rs 5 |
| Capital market transactions | 0.02%, capped at Rs 300 |
| P2M payments of Rs 2,000 or less | Free |
| Person-to-person (P2P) transfers | Free |
| Small merchants (up to Rs 1 lakh/month via UPI QR) | Exempt |
| UPI Autopay (subscriptions, recurring bills) | Free |
That said, the MDR has faced strong pushback. Retail traders’ associations had called a “No UPI Day” on October 2, 2026, to protest the fee. They called it off after meeting Finance Minister Nirmala Sitharaman in September.
A public interest litigation against the MDR is also pending in the Supreme Court. The court declined to stay the decision but asked the government to explain the legal basis for the charge.
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