UPI MDR Above Rs 2000 To Be Implemented Post Diwali: Check NPCI's Key Announcement, the Likely New Date

The rollout of the proposed Merchant Discount Rate (MDR) on select Unified Payments Interface (UPI) transactions has been postponed after Diwali, the National Payments Corporation of India (NPCI) announced on October 13. In a bid to avoid disrupting businesses during India’s festive shopping season, the charges would be implemented immediately after Diwali, with the exact date to be declared separately. The measure caters to industry requests for more time to prepare for the new proposal.

Earlier reports had hinted that implementation could be delayed to January 1, 2027. However, the latest announcement signals a post-Diwali rollout instead.

What is the proposed UPI MDR framework?

MDR is a fee paid by merchants to banks and payment companies for processing digital transactions. UPI payments have largely stayed free for merchants since the government removed MDR charges in 2020 to encourage digital payments.

Under the proposed framework, a 0.4 per cent MDR will apply to eligible person-to-merchant (P2M) UPI transactions exceeding Rs 2,000. The charge will be restricted at Rs 300 per transaction for payments of Rs 75,000 or more.

However, specific categories, including selected public services and bill payments, will have varied fee arrangements. Person-to-person transfers and eligible merchant transactions below Rs 2,000 will not attract the proposed MDR. Small merchants earning less than Rs 1 lakh in monthly UPI payments are also excluded from the framework.

Importantly, the postponement shifts the implementation timeline, not the proposed fee structure.

Why has the UPI MDR rollout been delayed?

The original implementation date was October 15. However, merchants, fintech companies and payment industry professionals raised doubts about introducing the charges during the hustling festive season, when digital payments typically soar.

Industry participants have also emphasised confusion over how different transaction categories will be listed and which MDR rates will apply. Payment companies and banks need time to update their systems, develop operational mechanisms and verify how the charges will be distributed.

Retailers are also concerned that the additional cost could impact their profit margins, especially for businesses that rely heavily on digital payments. Some merchant groups have also cautioned that businesses could try to pass the cost on to customers, although the proposed charge is levied on merchants only rather than consumers.

Will customers have to pay more for UPI?

The proposed MDR is targetted as a merchant-side charge rather than a direct fee on customers. However, some retailers fear that the additional expense could indirectly impact consumers through higher prices or changes in payment preferences.

The affect will be conditional on how merchants, banks and payment service providers respond once the framework takes effect. The exemption for smaller merchants and lower-value transactions is targetted to restrict the burden on parts of the retail sector.

Why is the MDR framework being introduced?

The payments industry has clarified that operating and sustaining UPI infrastructure involves massive costs. Launching MDR on selected transactions could fetch revenue for banks and payment companies, support technological upgrades and encourage continued investment in digital payment services.

However, the key challenge will be balancing these funding needs with the affordability and convenience that have popularised UPI nationally.