13 October,2026 02:56 PM IST | New Delhi | mid-day online correspondent
Representational Image. File pic.
The National Payments Corporation of India (NPCI) on Tuesday said that it has deferred the implementation of Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) until after Diwali, citing the ongoing festive season.
The new implementation date will be notified separately, it added.
"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 at a date to be notified separately," it said in a statement.
The move comes after several traders and retailers had pointed out that the MDR levy on UPI could increase the cost burden for merchants during the festive season when consumers generally purchase above Rs 2,000.
The government had last month said said that effective October 15, a 0.4 per cent MDR will be levied on merchants for UPI transactions over Rs 2,000, and the cost will be borne by the merchants and not the customers. Person-to-person transactions regardless of the amount, will remain free.
Railways, fuel, telecom, bill payments and insurance will have a flat fee of Rs 5 per transaction above Rs 2,000 and mutual fund and securities payments attract just 0.02 per cent, capped at Rs 300. MDR charge will be capped at Rs 300 for transactions of Rs 75,000 or more.
The Finance Ministry had said UPI has grown into the world's largest real-time interoperable payment system, processing 24.5 billion transactions in August 2026 alone.
The new framework ensures resources from higher-value merchant transactions are reinvested to support small businesses and strengthen digital payments across the country, it had said.
"To keep this system self-sustainable, secure and innovative, a small fee on high-value merchant transactions helps fund: better infrastructure and cybersecurity, support for small merchants in Tier III-VI towns and rural areas and, awareness and incentives to expand UPI adoption," it explained.
The MDR is a fee paid by merchants to payment service providers for processing digital transactions. The collected amount will be shared among banks and other entities in the UPI ecosystem.
Of the total MDR collected, 40 per cent will go to customers' banks, 30 per cent to payment gateway, 20 per cent to the UPI app and the remaining 10 per cent to the sponsoring bank of the UPI app.
Small merchants collecting up to Rs 1 lakh a month via UPI QR codes remain fully exempt from any new charge.
The government has pointed out that about 96 per cent of all merchant transactions will be without the MDR charges, as most of the UPI transactions at present are below Rs 2,000.
UPI transactions in terms of volume surged 27 per cent to around 145 billion from April to September this year. The UPI transaction in volume terms stood at 114 billion in the corresponding period last year.
In terms of value, the UPI transactions during the first six months of the current financial year grew at a slightly lower pace at 20 per cent to Rs 177 lakh crore. The UPI transactions in terms of value were at Rs 148 lakh crore during April to September of the previous financial year.
Operated by NPCI, UPI is used for real-time payments between peers or at merchants' end while making purchases.
NPCI, an initiative of the Reserve Bank of India (RBI) and the Indian Banks' Association, is an umbrella organisation for operating retail payments and settlement systems in India.
With presence in over 11 countries including Uzbekistan, Singapore, the United Arab Emirates, France, Mauritius, Nepal, Bhutan, Qatar, Sri Lanka, Cambodia, and Greece, UPI has transformed India's digital payments landscape.
