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The proposed merchant discount rate (MDR) on select UPI payments to merchants has been deferred until immediately after Diwali, according to an NPCI committee statement reported on 13 October 2026. The exact start date has not been announced. The reported proposal concerns eligible merchant transactions—not every UPI payment—and the government has said consumers and person-to-person (P2P) users will not face transaction charges.
What changed—and what has not
The UPI and Services Steering Committee, which is headed by NPCI, moved the proposed MDR start from the previously reported 15 October 2026 date to immediately after Diwali. NPCI said it would notify the calendar date separately. The committee’s stated reason was the festive season. Until that notification is issued, merchants should treat the new timing as “after Diwali,” not as a confirmed day. The Indian Express quoted the committee’s statement: “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 on a date to be notified separately.”
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This is a postponement of a proposed fee framework, not confirmation that charges have already begun. The reported rate, threshold and category rules are proposed terms; merchants should check the operative NPCI directions and their payment provider’s notice before relying on them.
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The reported framework distinguishes a merchant payment (P2M) from a transfer between individuals (P2P). It also sets an amount threshold and describes category-specific treatment, so it should not be read as a universal UPI charge.
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| Transaction or category | Reported proposed treatment | What to verify |
|---|---|---|
| Eligible bank-account-to-merchant payment above ₹2,000 | 40 basis points, or 0.40%, with a reported cap of ₹300 per transaction | Confirm eligibility and the cap in the operative NPCI directions and provider notice. |
| Merchant payment at or below ₹2,000 | Reported to remain outside the proposed standard MDR | Check the final threshold and any category-specific rule. |
| Exempt merchant categories | Reported to remain outside the levy | Confirm the merchant’s applicable category with its acquiring or payment provider. |
| Some specified categories | Media reports describe flat ₹5 fees for certain transactions; the Indian Express also reports a 0.02% rate for capital-market transactions | These are reported proposed category rates, not a complete final eligibility list. Check the applicable NPCI notice. |
| P2P transfers | The Ministry of Finance said they would continue to be free of charge | The reported MDR proposal is for select P2M transactions, not P2P transfers. |
Reports identifying examples of the proposed ₹5 categories include rail tickets, fuel, agricultural inputs, telecom or utility bills, insurance premiums and tax payments. The exact category boundaries and applicable rates should be confirmed in the operative notice; the examples should not be treated as a final, exhaustive schedule.
Will customers be charged?
The Ministry of Finance’s 8 August 2026 statement said: “Consumers making payments will not face any transaction charges.” It also said: “All Person-to-Person transactions will continue to be free of charge.” The later reported MDR framework is described as a fee on select merchant transactions. The available statements therefore do not establish that an individual customer will receive a separate MDR bill. They also do not establish whether a merchant may pass a fee through in prices; do not assume that is permitted or prohibited without an applicable authoritative rule.
The government’s PIB release framed the PSS Act amendment as an enabling measure and said the NPCI-headed UPI and Services Steering Committee would decide on MDR if the bill passed. Its position on consumer and P2P charges is distinct from the reported merchant-side proposal. Read the Ministry of Finance statement on PIB.
How broad could the proposal’s impact be?
The Economic Times reported that more than 95% of merchant-payment transactions by volume would remain free under the proposed terms. Separately, the Indian Express reported that payments above ₹2,000 account for 4% of P2M transaction volume but around two-thirds of its value. These are separately attributed media-reported estimates, not a single official statistic or an independently verified NPCI dataset. They suggest the distinction between transaction count and payment value matters: a small share of payments by count may represent a much larger share of the money moved.
The Economic Times also reported that the government budgeted about ₹2,000 crore for UPI and RuPay incentives in FY27, while prior payouts were ₹3,631 crore in FY24 and ₹1,046 crore in FY25. It attributed a ₹21,000 crore annual operating-cost estimate for the UPI ecosystem to NPCI CEO Dilip Asbe. These reported figures provide funding context, but do not show that the proposed MDR alone would cover ecosystem costs.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What merchants can do during the delay
The postponement gives merchants time to understand their exposure, but it does not itself confirm that a particular business or transaction will be charged. Use the interval to gather information from the provider that acquires or processes UPI payments.
- Review transaction mix. Identify the number and value of merchant UPI payments above ₹2,000. This helps estimate the potentially relevant share without assuming every such payment is eligible.
- Confirm category status. Ask the acquiring bank or payment provider how it classifies the merchant and whether any reported exemption or special rate applies.
- Request the operative rules. Ask for the NPCI notice or provider instructions that set the effective date, eligibility, rate and any category-specific treatment. Do not rely on a news summary for settlement configuration.
- Clarify reporting and settlement. Ask where any fee will appear in statements and settlement reports, and how the provider will calculate it. The available reports do not establish settlement mechanics.
- Wait for the date notice before changing processes. NPCI’s reported statement says the exact date will be notified separately. Follow that notice and the provider’s implementation instructions.
A displayed UPI QR code can help customers pay, but it does not determine MDR eligibility or replace provider guidance.
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The key outstanding detail is NPCI’s exact effective date. Merchants should also look for operative directions that confirm whether the reported ₹2,000 threshold, 0.40% standard rate, ₹300 cap, exemptions and special category rates apply as described. The cited reports do not establish the final implementation procedure or how an individual provider will apply the rules.
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