Govt gives green light to UPI MDR charges after Diwali, full story in 5 points

UPI charges on select payments above Rs 2,000 have been delayed until after Diwali. But what does this mean for merchants and customers? Here is why the rollout was postponed and who will have to pay.

In Short

• MDR charges on select UPI payments above Rs 2,000 have been delayed until after Diwali
• Consumers, personal transfers, AutoPay and most everyday purchases remain free
• Payments up to Rs 2,000 will remain free of MDR

The rollout of Merchant Discount Rate (MDR) charges on select UPI payments has been postponed until after Diwali, following appeals from traders. The charges were originally scheduled to take effect on October 15, 2026, but are now expected to kick in during the second week of November.

The National Payments Corporation of India (NPCI) is yet to announce the exact rollout date. The new rules will introduce charges on certain high-value UPI payments made to merchants, but everyday UPI payments will continue to remain free for consumers.

So, what does the new timeline mean, who will have to pay the charges, and why has the decision drawn mixed reactions? Here is everything you need to know.

1. Why has the UPI charge rollout been delayed?

The decision to delay the rollout was taken on October 13 by the UPI and Services Steering Committee, as the original date fell during the festive shopping season.

“Keeping in mind the festive season, the UPI and Services Steering Committee today decided that MDR on select Person-to-Merchant (P2M) UPI transactions shall be implemented immediately post Diwali,” NPCI said.

The move follows appeals from traders, who wanted more time before taking on additional costs and making changes to their payment systems during the busy festive season. The delay also gives banks, payment aggregators, fintech companies and merchants more time to prepare for the new rules.

2. How much will merchants have to pay?

Under the framework approved in September, an MDR of 0.4 per cent will apply to eligible person-to-merchant UPI transactions above Rs 2,000.

In simple terms, a merchant receiving an eligible payment of Rs 3,000 would pay Rs 12 in charges. On a payment of Rs 10,000, the fee would be Rs 40, while a Rs 50,000 transaction would attract Rs 200. The charge is capped at Rs 300 for transactions of Rs 75,000 or more.

Some sectors will have a different fee structure. Railways, telecom, insurance, fuel and certain other categories will attract a flat Rs 5 charge on eligible payments above Rs 2,000. Capital market transactions will attract an MDR of 0.02 per cent, capped at Rs 300.

3. No fee for customers

Now here is the important part. The UPI customers will not have to pay MDR charges when making UPI payments. The fee is intended to be charged to merchants accepting eligible transactions, and merchants cannot pass it on to customers.

Person-to-person transfers, self-transfers and UPI AutoPay transactions will also remain free under the framework.

4. No MDR charges for merchant payments up to Rs 2,000

Also, the payments of up to Rs 2,000 will continue to attract zero MDR. According to the framework, these payments account for more than 95 per cent of person-to-merchant UPI transactions.

Small merchants receiving up to Rs 1 lakh a month under the P2PM category will also continue to pay no MDR. They will not need to replace their existing QR codes either.

So, if you regularly use UPI to pay for groceries, meals or other everyday purchases, you don't need to worry about an additional fee on your payments. The proposed charges will apply only to eligible merchant transactions above Rs 2,000.

5. Why does NPCI want to introduce MDR charges?

According to the government, UPI has become one of India's most widely used digital payment systems, but keeping it running also comes with significant costs. Finance Ministry estimates put the annual cost of operating UPI at around Rs 20,000 crore.

The Centre has said government incentives were meant to provide short-term support, rather than serve as a permanent source of funding. The proposed MDR charges are expected to help cover costs related to payment infrastructure, cybersecurity, fraud prevention, innovation and customer support.

The framework also proposes a dedicated fund to help bring more merchants on board and improve digital payment infrastructure in smaller cities and rural areas, as well as the North-East, Jammu and Kashmir, and Ladakh.

- Ends