NPCI Defers MDR on UPI Payments Above Rs 2000 Until After Diwali

The National Payments Corporation of India has postponed the introduction of a merchant discount rate on person-to-merchant UPI payments above Rs 2,000 until after Diwali 2026.

The decision delays a charge that had been scheduled to begin earlier. NPCI, which operates the Unified Payments Interface, confirmed the deferral in statements carried by Indian media on 13 October. The rate will apply only to transactions above the threshold once it is activated. Smaller payments remain free for merchants under existing rules.

UPI has become the dominant retail payment system in India. Monthly volumes exceed 10 billion transactions in many recent months. Merchants have argued that a fee on higher-value payments would raise their costs, particularly for small retailers who already operate on thin margins. Consumer groups have noted that the change could lead some merchants to request cash for larger purchases or to pass the cost on in prices.

The postponement places the effective date after the main Diwali shopping period, when transaction volumes typically peak. NPCI has not published a firm start date beyond the post-Diwali window. Banks and payment apps that process UPI will need to update their systems once the rate is activated. The corporation has said it will issue further technical guidance closer to implementation.

Previous discussions about introducing an MDR on UPI have been deferred several times since the system was launched with zero merchant fees. The government has supported free UPI for consumers as a policy goal. The current proposal limits the fee to larger person-to-merchant transfers rather than applying a blanket charge.

Retail associations have welcomed the delay as giving businesses time to prepare. Some large merchants already negotiate separate arrangements with banks. The postponement does not alter the zero-charge rule for person-to-person transfers or for smaller merchant payments. Further details on the exact rate and any exemptions are expected from NPCI before the new date.