UPI transaction charges for select merchant payments deferred until after Diwali

The rollout of Merchant Discount Rate (MDR) charges on select Unified Payments Interface (UPI) transactions has been postponed until after Diwali following requests from traders to delay the implementation.

The National Payments Corporation of India (NPCI) announced the decision on Tuesday, October 13, after its UPI and Services Steering Committee reviewed concerns over the timing of the rollout.

“Keeping in mind the festive season, the UPI and Services Steering Committee today (October 13) decided that MDR on select Person-to-Merchant (P2M) UPI transactions shall be implemented immediately post Diwali,” NPCI said in a statement.

The new implementation date will be announced later. The charges were initially scheduled to take effect on October 15.

In September, the UPI Steering Committee fixed the MDR at 0.4% for select transactions above Rs 2,000. MDR is a fee charged to merchants for processing digital payments. At this rate, a transaction of Rs 10,000 would attract a fee of Rs 40.

Payments above Rs 2,000 in select sectors, including railways, telecommunications, insurance, fuel and agricultural inputs, will instead attract a flat MDR of Rs 5.

The Centre has said the proposed charges are intended to help fund UPI infrastructure, including cybersecurity, fraud prevention, system resilience and customer support. The fee will be borne by merchants, not consumers, while payments between individuals and most everyday merchant transactions will remain free.

According to the Finance Ministry's September FAQs, citing industry estimates, operating UPI costs around Rs 20,000 crore annually. The Centre has argued that government incentives alone cannot provide a sustainable long-term funding model.