UPI MDR deferral: CAIT backs govt decision ahead of festive season
Synopsis
The government's decision to defer a proposed MDR on select UPI transactions has drawn strong backing from CAIT, which credits direct lobbying — including a 20-member trade delegation that met Finance Minister Sitharaman on 30 September. With millions of traders and MSMEs entering peak festive season, the move buys time but leaves the core question of UPI's long-term financial sustainability unanswered.
Key Takeaways
CAIT welcomed the government's decision to defer the proposed MDR on select UPI transactions on 13 October 2026 .
A delegation of around 20 trade leaders led by CAIT Secretary General Praveen Khandelwal had met Finance Minister Nirmala Sitharaman at Kartavya Bhawan on 30 September .
CAIT argued the MDR would have burdened merchants operating on thin margins and slowed digital payment adoption among small traders and MSMEs .
The deferral comes during the peak festive and wedding season, when trading volumes are at their highest.
The structural question of financing UPI 's zero-MDR model remains unresolved and is expected to resurface in future regulatory discussions.
The Confederation of All India Traders (CAIT) on Tuesday, 13 October 2026, welcomed the government's decision to defer the proposed Merchant Discount Rate (MDR) on select Unified Payments Interface (UPI) transactions, calling the move a timely step that will protect traders and sustain digital payment momentum during the festive season. The deferral has been attributed by CAIT to effective lobbying by trade bodies and direct engagement with senior government leadership.
What the Deferral Means for Traders
According to CAIT, the postponement shields merchants from additional transaction costs that would have squeezed businesses already operating on thin margins. The body argued that imposing an MDR on UPI transactions — even selectively — risked discouraging wider digital payment adoption among small traders and micro, small and medium enterprises (MSMEs).
'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 in a statement.
The Trade Delegation That Preceded the Decision
The development follows a meeting on 30 September at Kartavya Bhawan, New Delhi, where a delegation of around 20 trade leaders, led by CAIT Secretary General Praveen Khandelwal, met Finance Minister Nirmala Sitharaman. CAIT said it had simultaneously coordinated with trade associations across the country to ensure merchants' concerns were channelled effectively to policymakers.
CAIT's Message to the Government
Khandelwal stressed that while the organisation fully backs digital payments, affordability for small businesses must remain a non-negotiable condition. 'We sincerely thank Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman for understanding the concerns of traders and taking a positive decision. CAIT supports digital payments, but the system must remain affordable and sustainable for merchants, especially small businesses,' he said.
He added that the deferment would 'strengthen traders' confidence and reinforce the Government's partnership with the trading community in building a stronger Digital India.'
Broader Context: UPI Growth and the MDR Debate
The MDR debate sits at the intersection of two competing priorities: expanding digital payment infrastructure sustainably and keeping transaction costs low enough to retain small merchant participation. UPI has grown into India's dominant retail payment rail, processing billions of transactions monthly, but its zero-MDR model has raised long-standing questions about the financial viability of the ecosystem for banks and payment service providers. Notably, this is not the first time an MDR proposal on UPI has been contested by trader groups — previous iterations were similarly stalled following industry pushback.
With the festive and wedding season now underway, the deferral offers immediate relief, but the structural question of how UPI's growth is financed remains unresolved and will likely resurface in future budget and regulatory cycles.
Point of View
Not a resolution. The government has repeatedly deferred this debate because the political cost of imposing charges on UPI — seen as a flagship Digital India success — outweighs the short-term fiscal gain. But zero-MDR is quietly straining payment infrastructure economics, and banks have flagged this for years. CAIT's celebration is understandable; what it doesn't address is that the sustainability question will land again, likely post-budget, and with greater urgency each time it is postponed.
NationPress
13 Oct 2026
Frequently Asked Questions
What is the UPI MDR deferral and why does it matter?
The government has deferred a proposed Merchant Discount Rate (MDR) on select UPI transactions, which would have charged merchants a fee on digital payments received. The deferral matters because it preserves the current zero-cost model for traders and MSMEs at a time when business volumes are elevated due to the festive season.
Why did CAIT welcome the UPI MDR deferral?
CAIT welcomed the deferral because it shields traders — especially small businesses and MSMEs — from additional transaction costs that, according to the body, would have strained thin-margin businesses and slowed digital payment adoption.
What role did CAIT play in securing the deferral?
CAIT coordinated with trade associations nationwide and led a delegation of around 20 trade leaders to meet Finance Minister Nirmala Sitharaman at Kartavya Bhawan, New Delhi, on 30 September, specifically to raise merchants' concerns about the proposed MDR.
What is Praveen Khandelwal's position on digital payments?
CAIT Secretary General Praveen Khandelwal said the organisation fully supports digital payments but insists the system must remain affordable and sustainable for merchants, especially small businesses, and should not impose burdens through transaction levies.
Will the MDR on UPI be reconsidered in the future?
The deferral is not a permanent cancellation; the structural debate over financing UPI's zero-MDR model is expected to resurface in future budget or regulatory discussions, as banks and payment providers have long flagged concerns about ecosystem viability.
