No MDR hike on UPI fee from October 15

In a major relief to UPI users, the decision to levy a 0.4 per cent Merchant Discount Rate (MDR) on transactions over Rs 2,000 was deferred on Tuesday, with the National Payments Corporation of India (NPCI) saying it will decide a new date after Diwali. It was originally scheduled to take effect from October 15.

“UPI and Services Steering Committee on Tuesday decided that, keeping in mind the festive season, MDR on select Person-to-Merchant (P2M) UPI transactions shall be implemented immediately post Diwali on a date to be notified separately,” NPCI said in a statement. The MDR has to be paid by merchants, not consumers, and capped at Rs 300 for transactions of Rs 75,000 or more.

The decision to defer came amid allegations by the Opposition, which termed it a tax and said the levy on specified UPI transactions above Rs 2,000 would burden consumers. As per the circular dated September 15, payments between individuals, as well as the vast majority of everyday merchant payments, were to remain free.

Essential services, such as railways, telecom, fuel, and insurance, were to attract a flat Rs 5 fee per transaction above Rs 2,000. Capital markets transactions (mutual funds, stockbroking) were to get a lower 0.02 per cent rate, also capped at Rs 300.

The National Payments Corporation, which operates the UPI platform, decided to levy MDR on certain UPI transactions to create a sustainable revenue framework for the digital payments ecosystem. According to NPCI, it will share the collected amount among banks and other entities in the UPI ecosystem. Of the MDR collected, 40 per cent will go to customers’ banks, 30 per cent to payment gateways, 20 per cent to the UPI app and the remaining 10 per cent to the sponsoring bank of the UPI app.

Welcoming the decision, the Confederation of All India Traders (CAIT) said the government’s move to defer the proposed MDR charges on UPI transactions is “timely and pragmatic”, particularly during the crucial festive and wedding season, when millions of traders and MSMEs depend on higher business volumes.

“Additional transaction costs could have placed an avoidable burden on merchants operating on thin margins and discouraged the wider acceptance of digital payments,” CAIT said.

It shared that the decision follows the meeting held on September 30, 2026, when a delegation of around 20 trade leaders met Finance Minister Nirmala Sitharaman and highlighted the implications of the proposed 0.4 per cent MDR on UPI transactions exceeding Rs 2,000.