UPI Merchant Charges to Begin After Diwali, NPCI Announces

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NPCI has postponed the implementation of MDR on selected person-to-merchant UPI transactions until after Diwali.
The previously announced framework proposed a 0.4% fee on eligible merchant transactions above ₹2,000, subject to applicable limits and exemptions.
The exact implementation date and affected transaction categories have not been specified in NPCI’s latest announcement.

New Delhi: The National Payments Corporation of India (NPCI) has deferred the introduction of Merchant Discount Rate (MDR) charges on selected Unified Payments Interface (UPI) transactions until after Diwali. The new implementation date will be announced separately.

In a post on X on October 13, NPCI said its UPI and Services Steering Committee had decided to delay the rollout, keeping the festive season in mind. The earlier schedule had set October 15 as the implementation date.

The decision comes ahead of Diwali, when retail purchases and digital payment activity typically increase. NPCI’s latest statement did not specify the exact date of implementation or identify all merchant categories that will be covered.

What Are the Proposed UPI MDR Charges?

The Merchant Discount Rate is a fee associated with processing digital payments, generally paid by merchants to the payment service providers involved in a transaction.

Under the framework announced earlier, an MDR of 0.4% was proposed for eligible person-to-merchant (P2M) UPI transactions above ₹2,000, subject to the applicable cap and exemptions. Person-to-person (P2P) transfers are outside this framework.

The earlier proposal also outlined different rates for certain transaction categories. However, the latest NPCI announcement has not provided a fresh, complete list of the categories that will attract charges after Diwali.

Businesses should therefore wait for the formal implementation circular before determining whether a particular transaction will attract MDR.

Will Customers Have to Pay for UPI Transactions?

The government has said that the proposed MDR is intended to be borne by merchants rather than passed on to customers.

According to the Finance Ministry, UPI transfers between individuals will remain free, while merchant payments up to ₹2,000 and transactions covered by the zero-MDR framework for small merchants will also remain free. The ministry said approximately 96% of merchant transactions would remain unaffected under the framework.

The government has also clarified that MDR is not a tax collected by the government or NPCI. Instead, the fee is distributed among participants in the payment ecosystem, including banks and payment application providers. <Cite refs={[“turn227779search3”]}/>

However, merchants will need to check the final rules and applicable exemptions once NPCI issues the implementation details.

Why Has NPCI Delayed the Rollout?

The postponement comes during the festive shopping period, when businesses and consumers rely heavily on digital payments.

Trade groups had raised concerns about introducing new merchant fees close to Diwali, arguing that the timing could create uncertainty for retailers and payment service providers. The delay gives the payment ecosystem additional time before the revised framework takes effect.

The earlier October 15 schedule has now been replaced by a post-Diwali rollout, although NPCI has not announced a specific date.

What Happens Next?

The next step is the formal notification confirming the implementation date and the transactions covered by the MDR framework.

Until those details are released, the previously announced rates should be treated as part of the earlier framework rather than a complete statement of the final rollout arrangements.