NPCI defers 0.4 percent MDR on large UPI merchant payments until after Diwali

The National Payments Corporation of India said on Tuesday that the planned Merchant Discount Rate on select person-to-merchant UPI transactions above Rs 2,000 will not take effect on 15 October. The UPI and Services Steering Committee decided to implement the charge immediately after Diwali, on a date to be notified separately, citing the festive season.

Diwali falls on 8 November this year. The original circular had set 15 October as the start date for a 0.4 percent MDR on eligible P2M payments above the Rs 2,000 threshold. Transactions of Rs 75,000 and above are capped at Rs 300. Certain essential categories, including railways, telecom, insurance, fuel and agricultural inputs, face a flat Rs 5 fee above the threshold. Person-to-person transfers and payments below Rs 2,000 remain free, as do transactions with small merchants under the existing framework.

NPCI said the collected amount will be shared among participants in the UPI ecosystem: roughly 40 percent to the customer’s bank, 30 percent to the payment gateway, 20 percent to the app, and 10 percent to the sponsoring bank. Merchants, not consumers, pay the MDR. Opposition parties had described the levy as a tax on digital payments; merchant groups had sought further delay or withdrawal.

The deferral gives retailers additional weeks during peak festive shopping before the new cost appears. NPCI has not published the final list of merchant categories that will face the 0.4 percent rate versus the flat Rs 5 charge, nor the precise post-Diwali start date. The structure itself is unchanged from the September notification. About 96 percent of P2M volume was expected to stay outside the charge under the original design.

The decision arrives as UPI volumes remain high and as the government has sought to keep low-value digital payments free while introducing a recovery mechanism for larger merchant transactions. Whether the post-Diwali implementation proceeds on the announced terms will depend on the notification that has yet to be issued. For the moment the concrete change is the postponement past the original 15 October deadline.

Place: Mumbai / New Delhi. Date: 13 October 2026.