NPCI Defers MDR Implementation on Select UPI Transactions Until After Diwali
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Khushi Jain
- October 13, 2026
The National Payments Corporation of India (NPCI) has deferred the implementation of the merchant discount rate (MDR) on select Unified Payments Interface (UPI) transactions until after Diwali. The revised implementation date will be notified separately.
The decision was taken by the UPI and Services Steering Committee on October 13, keeping the festive season in mind. The framework was originally scheduled to take effect from October 15.
MDR Rates for Select UPI Transactions
Under the framework announced on September 15, a 0.4% MDR will apply to eligible person-to-merchant (P2M) UPI transactions above Rs 2,000. The charge will be capped at Rs 300 for transactions of Rs 75,000 and above.
Transactions above Rs 2,000 in specified sectors, including railways, telecommunications, insurance, fuel and agricultural inputs, will attract a flat MDR of Rs 5.
Capital market transactions will attract an MDR of 0.02%, capped at Rs 300 per transaction.
UPI Transactions That Will Remain Free
Person-to-person (P2P) transfers and merchant payments up to Rs 2,000 will remain free. Small merchants covered under the person-to-person merchant (P2PM) framework will also continue to be exempt from MDR.
According to the government, around 96% of merchant transactions will remain unaffected by the revised framework. Merchants will not be allowed to pass on the MDR to customers.
Why the MDR Framework Was Introduced
The framework aims to support the sustainability of the UPI ecosystem and fund investments in payment infrastructure, security and merchant acceptance networks.
The charges will be distributed among participants in the payment ecosystem rather than collected as a tax by the government or NPCI.
FAQs
1. Why has NPCI deferred the MDR implementation on select UPI transactions?
The UPI and Services Steering Committee decided to defer implementation until after Diwali, keeping the festive season in mind.
2. When was the MDR framework originally scheduled to take effect?
The framework was originally scheduled to take effect from October 15. The revised implementation date will be notified separately.
3. What MDR will apply to eligible UPI merchant transactions above Rs 2,000?
A 0.4% MDR will apply, capped at Rs 300 for transactions of Rs 75,000 and above.
4. Which UPI transactions will remain free?
Person-to-person transfers and merchant payments up to Rs 2,000 will remain free. Small merchants covered under the P2PM framework will also remain exempt.
5. Will merchants be allowed to pass MDR charges on to customers?
No. Merchants will not be allowed to pass on the MDR to customers.
