The rollout of charges on select UPI merchant transactions has been pushed back until after Diwali. The National Payments Corporation of India confirmed on Tuesday that the Merchant Discount Rate on select person-to-merchant UPI transactions above Rs 2,000 will now be implemented immediately after the festival, with the exact date to be announced separately.
The proposed framework includes a 0.4% MDR on select transactions exceeding Rs 2,000. At that rate, a Rs 10,000 payment to a merchant would attract a charge of Rs 40. MDR is a fee paid by merchants for accepting digital payments, meaning it directly affects the cost of doing business digitally.
The charges were originally scheduled to take effect from October 15. NPCI deferred the date after merchant bodies, fintech firms and payment companies raised concerns about the timing. The festive season is the busiest period for retailers and online sellers, with transaction volumes rising sharply across shopping, electronics and travel. Introducing a new fee structure in the middle of that rush risked confusion over which transactions would attract charges and whether different rates would apply across categories.
Until now, UPI person-to-merchant transactions have been free. The zero-MDR regime, in place since January 2020, was a key driver of UPI’s explosive adoption. India processed over 16 billion UPI transactions in September 2026 alone. Introducing even a modest fee changes the economics for small merchants who switched to digital payments precisely because it cost them nothing.
The postponement buys time, but the fundamental question remains unchanged. When the charges do take effect, the test will be whether small merchants absorb the cost, pass it on to customers, or push back toward cash.
Source: India Today
