NPCI Delays UPI MDR Roll-out Until After Festive Season

The National Payments Corporation of India (NPCI) announced on Tuesday that it has delayed the introduction of Merchant Discount Rate (MDR) charges for certain UPI transactions. The implementation, initially planned for October 15, 2026, will now occur after the festive season, with a new date to be announced later.

MDR is a fee paid by merchants to banks for processing digital payments. The proposed structure would introduce a 0.4% MDR on select person-to-merchant (P2M) UPI transactions. For example, a merchant would pay Rs 8 on a Rs 2,000 transaction and Rs 40 on a Rs 10,000 transaction. Different rates apply to specific categories, such as loan repayments via autopay mandates, which will incur a flat fee of Rs 5.

Merchant groups had requested the delay, citing a need for more time to understand the varying rates and policies. The government had also expressed concerns that the charges could increase business costs during peak festive sales, at a time when inflation is already impacting consumers and businesses.

Industry stakeholders warned that higher payment costs could negatively affect consumer sentiment. Various merchant associations have cautioned that the new MDR could raise operating expenses and potentially drive small businesses back to using cash. The Retailers Association of India noted that a 0.4% fee could make cash preferable for smaller merchants, who argue they should not bear the cost of maintaining the UPI network.