The proposed implementation of the Merchant Discount Rate (MDR) on UPI payments for merchants is likely to be postponed until January 1, 2027. The charges were originally expected to come into effect from October 15, 2026. UPI MDR Charges Likely Delayed Until January 1, 2027: Big Relief for Merchants.
If the rollout is delayed, it is expected to provide significant relief to small businesses during the upcoming festive shopping season. The National Payments Corporation of India (NPCI)-led UPI and Services Steering Committee has reportedly discussed the rollout timeline, and a final decision is expected to be announced soon.
If the proposal is approved, UPI transactions for merchants will continue to remain free throughout the major festive period, from Diwali to Christmas.
Proposed MDR Framework:
Retail trade bodies had strongly opposed the introduction of MDR charges during the festive season, arguing that it would increase transaction costs for small merchants at a time when sales are at their peak. Under the proposed framework, customers will not be charged any fee, and the MDR will be borne entirely by merchants.
The proposal includes:
0.40% MDR on eligible merchant UPI transactions above Rs 2,000.
A maximum charge of Rs 300 per transaction.
For certain categories, including utility bill payments, education, and fuel, a flat fee of Rs 5 is being considered for transactions above Rs 2,000.
Festive Season a Key Factor:
The period between October and December is the most important sales season for retailers in India. Introducing additional payment processing costs during this period could adversely affect merchants’ profit margins, which is one of the key reasons the implementation is now likely to be deferred.
Earlier, retail trade associations had even announced a “No UPI Day” protest against the proposed MDR charges. However, the protest was withdrawn following discussions with Finance Minister Nirmala Sitharaman.
While the proposal to defer the MDR rollout has not yet been officially confirmed, merchants are hopeful that the charges will be postponed until January 1, 2027, allowing them to continue accepting UPI payments without additional costs during the festive season.
