NPCI Postpones UPI MDR Charges Until After Diwali: What Merchants and Users Need to Know
As per the official notice, NPCI has deferred the implementation of MDR on select UPI person-to-merchant (P2M) transactions.
The charges, earlier set to start on October 15, 2026, will now apply immediately after Diwali on a date to be notified separately.
This decision by the UPI and Services Steering Committee accounts for the festive season, when digital payment volumes rise sharply.
Merchants and payment firms had requested relief to prevent increased expenses during peak shopping periods.
Why Did NPCI Postpone the UPI MDR Rollout?
Merchant associations, including the All India Mobile Retailers Association and All India Consumer Products Distributors Federation, requested a delay. They cited festive-season cost pressures, the need for clearer guidelines on transaction categories, and time to prepare systems.
Earlier reports indicated requests to push the date to January 2027. The Steering Committee opted for a post-Diwali start instead of a fixed later date. The exact new date will be announced separately.
Impact on Merchants, Customers, and Fintechs
For customers: No change. UPI payments for shopping, bills, and transfers continue without charges during the festive period. Merchants cannot levy extra fees on users.
For merchants: Temporary relief from the new processing costs during high-volume Diwali sales. Large merchants and those in specified categories will face the charges once the new date arrives. Small merchants under the exemption threshold remain free.
For banks and payment companies: Revenue from MDR is delayed, but the MDR remains on track. Fintech stocks recovered after the announcement.
The existing zero-MDR structure continues until the revised date.
What Happens Next for UPI MDR Charges?
NPCI will notify the exact post-Diwali implementation date. Stakeholders should monitor official updates for any refinements to categories, exemptions, or operational rules.
This is not a cancellation. Former SBI chairman Dinesh Khara noted it signals clear intent to proceed after giving parties time to prepare.
UPI remains free for everyday low-value and person-to-person use. The limited MDR on higher-value select merchant transactions aims to sustain the system’s growth without affecting most users.
What Is UPI MDR?
MDR is the fee merchants pay banks and payment processors for accepting digital payments. UPI had operated largely without MDR for most transactions since 2020.
In September 2026, NPCI announced a framework for select P2M transactions:
0.4% MDR on eligible bank account-funded merchant payments above ₹2,000, capped at ₹300 per transaction.
Flat ₹5 MDR on transactions above ₹2,000 in categories such as railways, telecom, insurance, and fuel.
Person-to-person (P2P) transfers remain free.
Payments up to ₹2,000 stay free.
Qualifying small merchants are exempt.
Merchants cannot pass the fee to customers.
Only a small share of merchant transactions (around 4%) was expected to attract the charges, leaving over 95% of P2M transactions unaffected.
NPCI stated the revenue would support payment infrastructure, merchant expansion, and fraud prevention.
Source: Official NPCI Notice
Frequently Asked Questions
Ques. When will the new UPI MDR charges start now?
Ans. NPCI has not fixed an exact date. The charges will apply immediately after Diwali on a date that will be notified separately.
Ques. Will customers have to pay extra for UPI payments?
Ans. No. MDR is paid by merchants, not customers. Person-to-person transfers and most everyday merchant payments stay free. Merchants cannot pass the fee on to users.
Ques. Which UPI transactions will attract MDR after the delay?
Ans. Only select P2M transactions above ₹2,000. Only around 4% of merchant transactions are expected to be covered. Payments up to ₹2,000, all P2P transfers, and qualifying small merchants remain exempt.
Ques. Are small merchants still exempt from UPI MDR?
Ans. Yes. Qualifying small merchants stay exempt under the framework. The exact threshold details remain the same as the September announcement until any update is issued.
Qualifying small merchants, including those operating under the P2PM framework or with monthly UPI receipts up to ₹1,000,000 (or ₹1 lakh per month depending on the specific account criteria), remain exempt from paying MDR.
Ques. How much is the MDR charge on UPI?
Ans. 0.4% on eligible transactions above ₹2,000, capped at ₹300 per transaction. For railways, telecom, insurance and fuel, it is a flat ₹5 on transactions above ₹2,000.
Ques. Is the UPI MDR cancelled?
Ans. No. NPCI has only postponed the start date past Diwali. The MDR remains in place and will be implemented on a later notified date.
Ques. Will the MDR affect Diwali shopping for UPI payments?
Ans. No. UPI continues without MDR charges during the festive season. Merchants and customers can transact as usual with no new fees until after Diwali.
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