UPI MDR Deferred Until After Diwali: What Merchants and Fintechs Should Know
NPCI has deferred the UPI MDR rollout planned for 15 October until after Diwali. Here is what was proposed, who pays, and what to watch next.
The UPI MDR story has had a few twists this month. A merchant discount rate (MDR) on selected UPI payments was due to start on 15 October 2026, ending years of zero-charge merchant payments. Then, on 13 October, NPCI said the rollout would wait. For merchants, payment companies and anyone budgeting for acceptance costs, the delay is a pause, not a cancellation.
What was deferred
According to The Hans India, NPCI announced through its UPI and Services Steering Committee that the MDR "shall be implemented immediately post Diwali at a date to be notified separately", citing the festive season. No exact date has been given. An earlier Business Standard report on 8 October said the charge was likely to be pushed to 1 January 2027, but that was described as a likely proposal; NPCI's own wording is the one to rely on until a notice appears.
What was proposed
MDR is the fee a merchant pays when it accepts a digital payment. Think of it as the shop's cut paid to the road operator for every delivery that uses the highway. Reports describe the proposed structure as follows. Person-to-person transfers stay free. Payments to large merchants above ₹2,000 would carry 0.40%, capped at ₹300 per transaction. Select categories such as railways, telecom, insurance and fuel would pay a flat ₹5 on payments above ₹2,000. Small merchants receiving up to ₹1 lakh a month would stay at zero. Business Standard says consumers would not pay MDR directly, though it does not say who ultimately bears the cost; merchants could pass it on. Press descriptions of the ₹300 cap vary slightly (one report ties it to transactions above ₹75,000), so check NPCI's circular for the final wording.
NPCI estimated that about 4% of merchant transactions would be affected, with over 95% of person-to-merchant transactions staying exempt.
Why it matters
Brokerage estimates cited by Business Standard put annual MDR revenue for the payments and banking ecosystem at ₹15,000 to ₹20,600 crore. UPI has run for years without merchant fees, so the money has been funded in other ways, including government incentives. A charge changes the economics for payment apps, banks and acquirers.
Markets reacted to the uncertainty. On 8 October, Paytm closed 5.42% lower, MobiKwik 4.57% lower and Pine Labs 4.39% lower after the deferral talk, and The Hans India reported a sharp rebound from intraday lows after NPCI's announcement.
The demand risk
A LocalCircles survey of more than 67,000 UPI users, released on 2 October, found only 14% would keep paying above ₹2,000 if a merchant passed the MDR on. It reported 27% would move to cash and 26% to credit cards, and the firm estimated UPI volume could fall about 4% and value about 10% if the charge took effect. This is a survey estimate, not a forecast from NPCI. Remember that UPI volume was still strong: 24.07 billion transactions worth ₹29.37 trillion in September 2026, up 22.6% in volume and 18% in value year on year, with a record daily average of about 802 million.
A related thread: agentic payments
At the Business Standard BFSI Insight Summit on 27 October, speakers from Visa, Amazon Pay and Juspay discussed AI agents that buy on a user's behalf. They said accountability and audit trails need to be solved and suggested RBI and NPCI may need new guidelines. The article gave no figures. It is a useful signal that any UPI fee debate will sit alongside questions about who is liable when software initiates payments.
What to do now
Merchants should model the proposed rates against their ticket sizes above ₹2,000. Fintechs should treat the deferral as a window to plan pricing and communication. Consumers do not need to change habits today.
Key takeaways
- NPCI deferred the MDR rollout planned for 15 October until "immediately post Diwali", with the date still to be notified.
- The proposed rates are 0.40% (capped at ₹300) on larger merchant payments above ₹2,000, a flat ₹5 for select categories, and zero for P2P and small merchants.
- Survey data suggests user behaviour could shift if costs are passed on, but this is an estimate, not an outcome.
Sources
- [The Hans India: NPCI defers UPI MDR rollout until after Diwali](https://www.thehansindia.com/business/npci-defers-upi-mdr-rollout-until-after-diwali-fintech-stocks-rebound-1132053)
- [Business Standard: Fintech stocks decline as MDR on UPI likely to be deferred](https://www.business-standard.com/amp/markets/news/fintech-stocks-decline-as-mdr-on-upi-likely-to-be-deferred-to-january-1-1261008013701.html)
- [Business Standard: LocalCircles survey on UPI MDR](https://www.business-standard.com/amp/finance/news/upi-mdr-october-15-transaction-value-volume-fall-localcircles-survey-1261004000841.html)
- [Business Standard: UPI volume dips 1.8% in September](https://www.business-standard.com/finance/news/upi-transactions-september-2026-mdr-october-15-npci-1261001005101.html)
- [MediaNama: UPI transactions at 24.07 billion in September 2026](https://www.medianama.com/2026/10/223-upi-transactions-september-value-slipped/)
- [Whalesbook: Fintech leaders call for AI payment rules](https://www.whalesbook.com/news/English/bankingfinance/Fintech-Leaders-Call-for-AI-Payment-Rules-at-2026-Summit/6ae05d9d4fc30694db4e188e)
Tags: UPI MDR NPCI Payments Fintech