The proposed merchant discount rate on UPI payments above ₹2,000 has been deferred until after Diwali, according to the reported decision by the National Payments Corporation of India. The charge had been scheduled to begin on 15 October.
The planned fee is 0.4% and would apply to eligible merchant transactions. Customers would not be charged directly, and ordinary person-to-person UPI transfers would remain free under the information available.
NPCI has poned the move in view of the festive season. The organisation has said the fee will be introduced after Diwali, but the exact date has not been announced.
What the proposed MDR means
Merchant discount rate, commonly called MDR, is a fee paid by a merchant to banks and payment service providers for using digital payment infrastructure. It can apply to services such as payment gateways or point-of-sale systems.
The fee is intended to meet the cost of operating digital payment infrastructure and transfer networks. Under the proposed UPI arrangement, the merchant—not the customer—would bear the charge.
That distinction means the immediate effect for customers would be limited: the reported fee would be linked to the merchant transaction, while the customer would continue to use UPI without paying MDR directly.
Why payments above ₹2,000 matter
Payments above ₹2,000 make up less than 5% of merchant UPI transactions by count. Their share is much larger when measured by value, accounting for about 67% of the money involved in merchant payments.
The value of these larger transactions is estimated at about ₹6 lakh crore each month. That represents about 20% of the value of all UPI transactions across the country.
The figures show why the proposed fee is focused on larger merchant payments. Although these transactions are fewer in number, they represent a substantial portion of the money moving through the UPI system.
Government support for UPI
The government began an incentive scheme in 2021-22 to promote UPI and support free digital payments. Under the scheme, an incentive of 0.15% was provided for UPI payments of up to ₹2,000 made by customers to small merchants.
By 2024-25, the incentive provided under the scheme had reached ₹8,276 crore. The reported figures also state that India had about 55.5 crore UPI users by June 2026.
The proposed MDR would therefore mark a change for a defined category of merchant transactions, while payments up to ₹2,000 and customer usage remain covered by the existing information in the report. The next confirmed step is an announcement of the implementation date after Diwali.
Conclusion
NPCI has delayed the planned 0.4% MDR on merchant UPI payments above ₹2,000 until after Diwali. Merchants would pay the proposed fee, customers would not be charged directly, and the final start date remains pending.
Frequently Asked Questions
Q. When was the UPI MDR fee originally scheduled to start?
The proposed fee was scheduled to begin on 15 October.
Q. Which UPI payments would attract the proposed fee?
The proposed 0.4% MDR would apply to merchant UPI payments above ₹2,000.
Q. Who would pay the MDR?
The merchant would pay the fee to banks and payment service providers. Customers would not pay it directly.
Q. When will the fee be introduced?
NPCI has said it will be introduced after Diwali, but it has not announced the exact date.
Q. How large are payments above ₹2,000 by transaction count?
They account for less than 5% of merchant UPI transactions by count.
Q. What share of merchant payment value comes from these larger transactions?
They account for about 67% of the value of merchant UPI payments.
Q. How much do these larger payments represent each month?
Their value is about ₹6 lakh crore each month, or about 20% of total UPI transaction value across the country.
Q. How much incentive had the government provided by 2024-25?
The incentive provided under the UPI support scheme had reached ₹8,276 crore by 2024-25.
