FESTIVE RELIEF FOR DIGITAL PAYMENTS: INDIA PUSHES BACK NEW UPI MERCHANT FEES UNTIL AFTER DIWALI
October 13, 2026
The proposed Merchant Discount Rate (MDR) on select high-value Unified Payments Interface (UPI) transactions has been deferred until after Diwali, giving merchants and payment-service providers additional time to prepare for the revised fee structure.
The National Payments Corporation of India (NPCI), which operates the UPI payment system, announced the postponement on Tuesday. The charge had initially been scheduled to take effect from October 15, 2026. A revised implementation date will be announced separately.
Under the proposed framework, a 0.4 per cent MDR will apply to selected person-to-merchant (P2M) UPI transactions exceeding ₹2,000. The fee is intended for merchant payments rather than ordinary transfers between individuals.
The postponement comes ahead of the festive season, when retail purchases and digital payments typically increase substantially. Delaying implementation is expected to give banks, payment aggregators, fintech companies and merchants more time to update their payment systems and accounting arrangements.
SMALL-VALUE PAYMENTS REMAIN UNAFFECTED
The proposed fee structure does not cover UPI transactions of ₹2,000 or less. Person-to-person transfers between individuals will also remain outside the proposed MDR framework. The charge is designed to apply to eligible merchant transactions exceeding the specified threshold.
The MDR represents a fee associated with accepting digital payments, rather than a direct transaction charge imposed on the customer under the announced framework. Its introduction is intended to provide a revenue mechanism for supporting the infrastructure and services required to operate the digital payments ecosystem.
The delay, however, means that the revised charges will not begin on the originally scheduled October 15 date. Merchants and payment-service providers will have to await the NPCI’s announcement of the new implementation date after Diwali.
The decision provides temporary relief from an immediate change during the busy festive shopping period, while leaving the proposed high-value merchant-payment fee framework in place for subsequent implementation.
