NPCI Defers Proposed MDR on Select UPI Merchant Payments

NPCI Postpones MDR Implementation

NPCI Defers Proposed MDR on Select UPI Merchant Payments: The National Payments Corporation of India (NPCI) has reportedly deferred the proposed 0.4% Merchant Discount Rate (MDR) on certain UPI merchant transactions exceeding ₹2,000 until after Diwali 2026. The charge was initially scheduled to take effect on 15 October 2026.

The postponement followed consultations with trade representatives and concerns about transaction costs during the festive and wedding seasons, when retailers and small businesses handle substantial payment volumes.

What Is Merchant Discount Rate?

The Merchant Discount Rate (MDR) is a fee associated with processing electronic payments accepted by merchants. It helps support the payment ecosystem, including participating banks and payment service providers.

Under the reported proposal, the charge applies to specified Person-to-Merchant (P2M) transactions. It is generally borne by the merchant rather than automatically deducted from the customer’s payment.

Static GK fact: NPCI operates major retail payment systems in India, including UPI, RuPay and the Immediate Payment Service (IMPS).

Proposed UPI MDR Structure

According to the supplied report, the proposed framework includes the following rates and exemptions.

These figures describe the reported proposal, not necessarily the final rules after the postponement. The precise scope of eligible merchant categories and exemptions would depend on the applicable NPCI framework.

Who Pays the MDR?

Under the proposed arrangement, the merchant would pay the MDR. It is intended to compensate participants involved in processing and maintaining the digital-payment infrastructure.

However, merchants may be concerned that additional transaction costs could affect businesses operating on narrow margins, particularly small traders and micro, small and medium enterprises (MSMEs).

The Confederation of All India Traders (CAIT) welcomed the reported delay, arguing that introducing additional costs during the festive season could place pressure on traders.

Why Was Implementation Deferred?

The reported decision by NPCI’s UPI and Services Steering Committee was intended to provide merchants with additional time during the busy festive and wedding period.

The supplied report also states that a delegation of 20 trade representatives met Union Finance Minister Nirmala Sitharaman on 30 September 2026 to discuss the proposed charges.

The postponement reflects the need to balance the financial sustainability of payment services with the affordability of digital transactions for merchants.

Legal and Economic Significance

The framework is discussed in the context of the Payment and Settlement Systems Act, 2007, which provides the legal framework for regulating payment systems in India.

The policy debate centres on three objectives: sustaining payment infrastructure, protecting small merchants from excessive costs and maintaining the accessibility of digital payments.

Static GK Tip: UPI enables instant bank-to-bank payments through a mobile-based interface. It is operated by NPCI under the broader oversight of the Reserve Bank of India (RBI).

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NPCI Defers Proposed MDR on Select UPI Merchant Payments: