UPI MDR charges on P2M transactions: Merchants await NPCI rollout date after Diwali
Synopsis
India's UPI ecosystem is on hold for a critical date: NPCI is yet to announce when MDR charges will kick in for merchant payments above ₹2,000. With Diwali over and the festive deferral no longer justified, merchants are reconfiguring systems while awaiting a go-live notification that could fundamentally alter the cost economics of digital payments acceptance in India.
Key Takeaways
NPCI deferred the UPI MDR rollout beyond the original 15 October date to avoid extra costs during the festive season.
An MDR of 0.4 per cent will apply to eligible P2M UPI transactions exceeding ₹2,000 , capped at ₹300 for transactions of ₹75,000 and above.
Sectors including railways , telecom , insurance , and fuel will pay a concessional flat ₹5 per transaction above ₹2,000.
Capital market transactions attract a concessional rate of 0.02 per cent , capped at ₹300 .
The MDR is a merchant-side fee ; customers and all P2P UPI transfers remain unaffected.
The exact effective date is yet to be notified by NPCI as of 10 November 2026 .
Merchants across India are waiting for the National Payments Corporation of India (NPCI) to announce a revised implementation date for Merchant Discount Rate (MDR) charges on select person-to-merchant (P2M) Unified Payments Interface (UPI) transactions, as the originally planned 15 October rollout was deferred to prevent additional costs during the festive season.
Why the Rollout Was Delayed
NPCI had pushed back the introduction of MDR charges beyond the initial 15 October deadline specifically to shield merchants and consumers from extra transaction costs during the high-volume Diwali shopping period. With Diwali now over and Bhai Dooj falling on 11 November, the trade and payments ecosystem is looking to NPCI for a confirmed go-live date. The UPI and Services Steering Committee had earlier decided that MDR on these transactions would be activated immediately after Diwali, with the precise effective date to be notified separately.
How the MDR Structure Works
According to NPCI's published frequently asked questions, an MDR of 0.4 per cent will apply to eligible P2M UPI transactions exceeding ₹2,000. The charge is capped at ₹300 for transactions of ₹75,000 and above. To illustrate: a merchant receiving a UPI payment of ₹1 lakh would have faced a 0.4 per cent charge of ₹400, but the prescribed cap limits the actual MDR outgo to ₹300.
Concessional Rates for Specific Sectors
Certain merchant categories will attract a concessional flat MDR rather than the standard percentage-based rate. These include railways, telecom services, insurance, and fuel — sectors where transactions are frequent and margins are thin — which will pay a flat ₹5 per transaction for payments above ₹2,000. Capital market transactions, covering payments to mutual funds, securities, stockbrokers, and dealers, attract a concessional rate of 0.02 per cent, subject to a maximum cap of ₹300.
What Remains Free for Customers and Individuals
Importantly, the MDR is a merchant-side fee — the customer initiating the UPI payment will remain completely unaffected. NPCI has also clarified that person-to-person (P2P) UPI transfers will continue to be free of charge, as the proposed MDR applies exclusively to qualifying P2M transactions. This distinction is critical: everyday peer transfers, splitting bills, or sending money to family will not attract any new cost.
What Merchants and the Industry Are Watching
The absence of a confirmed date is creating operational uncertainty for merchants, particularly small and medium businesses that process large volumes of UPI payments daily. Industry stakeholders are keenly awaiting NPCI's formal notification, which will trigger changes to payment gateway configurations, merchant agreements, and accounting systems. The rollout, once announced, is expected to reshape the economics of digital payments acceptance in India — a market that now processes billions of UPI transactions every month.
Point of View
Even selectively and with caps, risks a renegotiation of that social contract. NPCI's silence post-Diwali suggests the regulator is carefully calibrating the sequencing to avoid a backlash from small merchants who lack the lobbying heft of large digital commerce players. The real question is whether the revenue from MDR will be ring-fenced to fund UPI infrastructure or simply absorbed into bank margins — a distinction that will determine whether this reform is developmental or extractive.
NationPress
10 Nov 2026
Frequently Asked Questions
What is the UPI MDR charge being introduced by NPCI?
NPCI is set to introduce a Merchant Discount Rate (MDR) of 0.4 per cent on eligible person-to-merchant (P2M) UPI transactions exceeding ₹2,000, capped at ₹300 for transactions of ₹75,000 and above. The charge is paid by the merchant receiving the payment, not the customer.
When will the UPI MDR charges come into effect?
The original rollout was planned for 15 October but was deferred by NPCI to avoid additional costs during the Diwali festive season. As of 10 November 2026, NPCI has not yet notified the revised effective date, though the UPI and Services Steering Committee had indicated the charges would be implemented immediately after Diwali.
Will customers have to pay UPI MDR charges?
No. The MDR is a merchant-side fee and the customer making the UPI payment will not be affected. Additionally, all person-to-person (P2P) UPI transfers will remain completely free and are excluded from the MDR framework.
Which sectors get concessional UPI MDR rates?
Railways, telecom services, insurance, and fuel will attract a flat concessional MDR of ₹5 per transaction for payments above ₹2,000, rather than the standard 0.4 per cent rate. Capital market transactions — including mutual funds, securities, and stockbrokers — attract a concessional rate of 0.02 per cent, capped at ₹300.
How does the ₹300 cap on UPI MDR work in practice?
For any single P2M UPI transaction of ₹75,000 or more, the MDR charged to the merchant is capped at ₹300, regardless of the transaction size. For example, a ₹1 lakh payment would have attracted ₹400 at 0.4 per cent, but the cap limits the actual fee to ₹300.
