UPI MDR deferred: NPCI pushes merchant fee to after Diwali
Why in the news
On 13 October 2026, the National Payments Corporation of India (NPCI) deferred the planned merchant discount rate (MDR) on select person-to-merchant UPI payments. It will now apply soon after Diwali, on a date yet to be notified.
Key facts
- Decision-maker: NPCI’s UPI and Services Steering Committee.
- Original date: 15 October 2026, under an NPCI circular of 15 September 2026.
- Reason: the festive season; traders had warned of extra costs on thin margins.
- Rate: 0.40% on P2M UPI payments above ₹2,000, with a ₹300 cap.
- Flat fee: ₹5 per transaction for select categories such as fuel.
- Capital markets: mutual funds and stockbroking would pay 0.02%, also capped at ₹300.
- Free: P2P transfers and merchant payments up to ₹2,000.
MDR revenue sharing
| Entity | Share |
|---|---|
| Customer’s bank | 40% |
| Payment gateway | 30% |
| UPI app | 20% |
| Sponsor bank of the UPI app | 10% |
About MDR and UPI
MDR is the fee a merchant pays to the banks and payment firms that process a digital payment. UPI handled a record average of 802 million transactions a day in September 2026, with monthly volume of 24.07 billion. Trader groups had earlier called a “No UPI Day” protest, which they withdrew after meeting Finance Minister Nirmala Sitharaman.
Exam angle
- NPCI runs UPI; the steering committee took the deferral decision.
- Key numbers: 0.40% rate, ₹2,000 threshold, ₹300 cap, ₹5 flat fee.
- MDR is borne by merchants, not customers.